The episode begins when Kohaku approaches Kikyo in the mist, and tells her to take his Shikon Jewel Shard. Kikyo sensed no fear or uncertainty in his decision, then Kikyo turned around abruptly and left, Kohaku follws her.
InuYasha and friends, Koga, Ginta, Hakkaku, the young boy from before, and his brother Shinta, are gathered on a rocky cliff. Koga is continuing on his journey to kill Naraku alone, leaving Ginta and Hakkaku behind with Shinta and his older brother. Koga sets off, as well as Inuyasha and friends.
Two demons, Ginka and Kinka are battling in the sky. Then, the Infant commands Moryomaru to absorb the two demons, two gain more strength and connection between Moryomaru and his shell.
Meanwhile, Shippo and Totosai discuss what happened between InuYasha and his Tetsusaiga while he was battling Moryomaru. Totosai explains that the problem isn't Tetsusaiga, but Inuyasha, because he is only a half demon, he doesn't have the strength to absorb all the demonic energy from the Dragon Scaled Tetsusaiga. Totosai says that in order for InuYasha to become stronger, he must go to see the Great Holy Demon Spirit.
Later, Ginka and Kinka are still battling in the sky, when Moryomaru tries to absorb them, he is struck fatally by them. Down below, Byakuya wonders if this blow will affect Naraku's heart. Sesshomaru comes and attacks Byakuya from behind as an introduction to their first meeting. Byakuya is deeply annoyed. They both wonder what Moryomaru is doing.
Moryomaru is being attacked by Ginka and Kinka, but they are no match for him, Moryomaru absorbs them and gains their strength.
Down below, Byakuya understands what Moryomaru is doing, he thinks Naraku could be in trouble because of this. Byakuya notices that Sesshomaru is gone.
Sesshomaru comes up behind Moryomaru. Sesshomaru uses his Meido Zangetsuha, and Moryomaru retreats. Byakuya keeps Sesshomaru from going after Moryomaru. When Moromaru is out of sight, Byakuya leaves as well.
In a villiage, InuYasha and friends, led by Totosai's three-eyed cow, have come to the Great Holy Demon Spirit's house. When they enter, they see that his house is full of illusions. InuYasha and friends meet the Demon Spirit, who says it is impossible for him to help InuYasha, because last night an evil demon came, and stole the Great One's guts, which makes him unable to help. They all go outside and see that the villiage is now full of demons, but it's only an illusion created by the demonic energy drifting in the air from the Great One's stolen guts. The demon who stole the guts has hidden himself among the "demon" villiagers, so as not to be found and destroyed. Inuyasha says he will find the real, guilty demon, then the Great one put a seal of chains on Tetsusaiga so that Inuyasha can only draw Tetsusaiga when he reaches the real demon, not any of the disguised villiagers. InuYasha finds some real demons, but is still unable to draw Tetsusaiga because these weren't the demon who ate the Great One's guts. More chains have come onto the Tetsusaiga because InuYasha attcked demons that weren't the actual culprits. A young boy's mother turns out to be the culprit, but for some reason, Inuyasha still can't draw Tetsusaiga. The Great One tells InuYasha to find the demon's Demon Vertex in order to kill it. The demon uses fake Demon Vertexes to trick Inuyasha. InuYasha concentrates and uses his amazing sense of smell to find the real demon's Vertex and he cuts through it with his claws, and kills the demon. InuYasha realizes that, that demon was not the real thing, it was a fake. InuYasha also sees that the Great One is gone too. InuYasha and Kagome set off to find the real demon. The villiagers are still demons. Then, InuYasha finds the real demon. The demon has killed the Great One. InuYasha says he will avenge the Great One's death, when the chains on Tetsusaiga break off. InuYasha draws his Dragon Scaled Tetsusaiga, and he uses his nose to eventually find the real demon's Demon Vertex, and cut it down with his Tetsusaiga to kill the evil demon. Everything is now returned to normal. Then, the Great One comes and says that everything that just happened was an illusion of his doing, in order to train InuYasha. The Great One says that the purpose of this illusion was to train InuYasha's eyes to be able to see Demon Vertexes, in order to be able to defeat difficult demon opponets. This is how the Dragon Scaled Tetsusaiga is intended to be used, to cut down Demon Vertexes, not to absorb demonic energy. InuYasha draws Tetsusaiga, and sees that it's full of new energy, from the Great One.
The episode ends with the Great One thinking to himself that there is one more attack that InuYasha has yet to gain in order to completely master Tetsusaiga. He will let InuYasha figure it out on his own. The episode ends with a shot of InuYasha, then the screen fades out, and the episode ends.