200 years ago, Inuyasha's father sealed away a powerful demon from a foreign land named Hyoga. A Shikon Jewel Shard awakens Hyoga's son, Menomaru, inspiring him to absorb the remains of his father's power to take control of the world.

Within the dark recesses of Horai Island, a group of half-demons live under the demonic rule of the Four War Gods. Escaping with barely a shred of hope, Ai, the youngest of the half-demons, returns to the island with Inuyasha, who must face not only the Four War Gods, but the past he left behind on the island fifty years ago.

Many years ago, the Great Dog Demon wielded the Three Swords of the Fang. Upon his death, he bequeathed a sword to each of his sons, Inuyasha and Sesshomaru, leaving the third sword, the wrath-filled Sounga, locked away forever. Now that the Sounga's power has been awakened, these two battling brothers must put away their sibling rivalry and face off against the force that spells doom for all mankind.

With their greatest foe seemingly defeated, Inuyasha and his friends return to normal lives. But their short period of peace is once again shattered as a new enemy begins to emerge. Kaguya, the self-proclaimed Princess from the Moon of legend, plots to plunge the world into a perpetual night of the full moon. Inuyasha, Kagome, Miroku, Sango and Shippo must once again unite to face a new threat.