Kao Yu is a well-respected judge who travels from town to town in ancient China, making courtroom judgements that are sometimes assisted by the blessed appearance of a powerful unicorn that unerringly knows who speaks the truth and who lies. But when Kao Yu has to judge a beautiful young thief, Lanying, he lets his own desire for her override his knowledge of right and wrong, and he is overly lenient in her sentencing. As his obsession with Lanying grows, she takes advantage of it, and uses Kao Yu to commit further robberies, and the unicorn abandons Kao Yu.

When Lanying is accused of murder, a sorrowful Kao Yu returns to her village, determined to deliver a just verdict. The unicorn returns at last, and knowing that it will kill anyone it observes lying, Kao Yu implores Lanying to tell the truth about the murder. She lies. Before the unicorn can strike her down, Kao Yu intervenes, his love for the remorseless thief overriding his commitment to justice. Lanying is spared, and manages to escape, never to return. The unicorn, too, never returns to Kao Yu again. Shamed by the choice he made, Kao Yu retires as a judge, and eventually dies of a broken heart.