Set in a small Chinese town, the story follows two prominent and rival martial artists, Master Lung and Master Tan. Both men are consumed with outdoing each other, escalating their rivalry when the annual lantern festival approaches, as they each aspire to have the most impressive display. In a bid to secure victory, Lung hires an exceptional craftsman named Chao, unbeknownst to him, Chao harbors a deep-seated grudge against both men. Chao schemes to take revenge by creating exquisite lanterns made from human skin, a twisted form of art that requires him to abduct and murder innocent women to fulfill his dark ambition.

As the lantern festival draws nearer, tension mounts as several local women mysteriously disappear, including those close to Lung and Tan. Each disappearance deepens the suspicion and hostility between the martial arts masters, who are unaware of Chao's sinister role in the unfolding nightmare. The town becomes increasingly fearful as whisperings of a monstrous killer among them spread, yet the search for answers leads Lung and Tan back to old grievances and conflicts. With personal stakes rising and time running out before the festival, revelations from the past and present converge in a chilling climax as the true extent of Chao's vengeance is revealed. The atmosphere grows even grimmer, amplifying the sense of dread as the community grapples with a horror lurking just beneath the surface of their traditional festivities.