The protagonist, Yang Guo, is the orphaned son of Yang Kang, the antagonist in The Legend of the Condor Heroes. The couple Guo Jing and Huang Rong raises Yang Guo briefly before he is sent to the Quanzhen Sect for better guidance in moral values and orthodox martial arts. In Quanzhen, Yang Guo is often picked on and bullied by his fellow students, and even his master, Zhao Zhijing, is biased against him. Yang Guo flees and ventures unknowingly into the nearby Tomb of the Living Dead, where the Ancient Tomb Sect is housed. He is saved by Xiaolongnü, a mysterious maiden of unknown origin, and becomes her apprentice. They live together in the tomb for many years until Yang Guo grows up. After being attacked by Li Mochou, they leave the tomb and stay on the mountain. Xiaolongnü develops romantic feelings for Yang Guo and after a while, he falls in love with her.

However, their romance is forbidden by doctrines of the Confucianism society of that time. Throughout the story, their love meets with several tests, such as the misunderstandings that threaten to tear them apart and the encounter with Gongsun Zhi. Finally, after their reunion and marriage, Xiaolongnü leaves Yang Guo again, owing to her belief she cannot recover from a fatal poison, and promises to meet him again 16 years later. While Yang Guo is wandering the jianghu alone, he meets several formidable martial artists and a giant condor. His adventures gradually mould him into a courageous martial artist, whose prowess matches the Greats of his age. Yang Guo serves his nation by helping the Han Chinese citizens of the Song Dynasty defeat the Mongol invaders. At the end of the novel, he is reunited with Xiaolongnü and they are recognized as heroes of their time.