The Smiling, Proud Wanderer

In the jianghu (martial artists' community), there is a highly-coveted martial arts manual known as the "Bixie Swordplay Manual". The manual is an heirloom of the Lin family, who run the Fuwei Escort Agency, a private security service, in Fuzhou. Yu Canghai, the leader of the Qingcheng Sect, leads his followers to massacre the Lins and attempts to seize the manual but does not find it. Lin Pingzhi, the sole survivor of the Lin family, is saved by Yue Buqun, the leader of the Mount Hua Sect, which is a member of the orthodox Five Mountains Sword Sects Alliance. Yue Buqun accepts Lin Pingzhi as an apprentice and trains him in swordplay.

The novel's protagonist is Yue Buqun's most senior apprentice, Linghu Chong, an orphaned, happy-go-lucky but honourable swordsman who has a penchant for alcoholic drinks and fine cuisine. He befriends the notorious bandit Tian Boguang and saves Yilin, a nun from the (North) Mount Heng Sect, from Tian's lecherous advances. In the meantime, Liu Zhengfeng of the (South) Mount Heng Sect announces his decision to leave the jianghu and invites his fellow martial artists to witness his retirement ceremony. The event turns into a bloodbath when Zuo Lengshan, the chief of the Mount Song Sect, and the other sword sects accuse Liu Zhengfeng of being unfaithful to their alliance by befriending Qu Yang, an elder of the "evil" Sun Moon Holy Cult. Liu Zhengfeng and Qu Yang are cornered by Zuo Lengshan and his men and eventually commit suicide. Before dying, Liu Zhengfeng and Qu Yang give Linghu Chong the score of Xiaoao Jianghu, a musical piece they composed together.

Lin Pingzhi's entrance into the Mount Hua Sect causes Linghu Chong to lose his romantic feelings for Yue Lingshan, Yue Buqun's daughter, because she starts falling in love with Lin Pingzhi. Linghu Chong's association with unorthodox jianghu figures leads him into trouble; Yue Buqun punishes him by making him stay alone for a year in a secluded area on Mount Hua to reflect on his "misdeeds". He discovers carvings of swordplay techniques in a cave, practises them, and unknowingly familiarises himself with not only the skills of the other four sword sects, but also the counter-moves. He encounters Feng Qingyang, an elderly Mount Hua Sect swordsman, who teaches him the powerful skill "Nine Swords of Dugu".

The self-proclaimed righteous Five Mountains Sword Sects Alliance, though seemingly united, is constantly troubled by politicking among its members. Linghu Chong gets entangled in the internal conflict and ends up seriously injured while using his newly mastered skill to save his Mount Hua Sect fellows from attacks by Mount Song Sect members in disguise. Before long, the other sword sects accuse Linghu Chong of stealing the "Bixie Swordplay Manual", while Yue Buqun becomes suspicious of his apprentice and jealous of his sudden leap in swordplay prowess.

Linghu Chong meets the "Six Immortals of the Peach Valley", who attempt to cure his wounds in their weird fashion, but they fail and aggravate his injuries instead. He follows Yue Buqun and the others to Luoyang, where he encounters Ren Yingying of the Sun Moon Holy Cult and several jianghu lowlifes, who are friendly towards him and try to heal him. By then, Yue Buqun has grown tired of Linghu Chong's frequent associations with jianghu lowlifes so he abandons him. Linghu Chong helps Ren Yingying after she is assaulted by enemies of the Sun Moon Holy Cult. She brings him to Shaolin Monastery to recuperate from his injuries. He learns from Fangzheng, the Shaolin abbot, that Yue Buqun has publicly announced that he has expelled Linghu Chong from the Mount Hua Sect.

Linghu Chong sinks into despair as he is now an outcast of the orthodox side of the jianghu. After leaving Shaolin, he meets a stranger, Xiang Wentian, whom he saves from dozens of enemies. Xiang Wentian becomes sworn brothers with Linghu Chong and brings him to a manor in Hangzhou, where they find Ren Woxing (Ren Yingying's father), the former leader of the Sun Moon Holy Cult who was ousted from power by his deputy, Dongfang Bubai. Ren Woxing breaks out of captivity by knocking out Linghu Chong and using him as a decoy. While trapped inside the dungeon, Linghu Chong discovers carvings of Ren Woxing's infamous "Star Sucking Great Skill" and learns the skill by chance. Ren Woxing returns to save Linghu Chong later and tries to persuade him to join the Sun Moon Holy Cult by offering him Ren Yingying's hand in marriage. Linghu Chong declines to join, but still helps Ren Woxing defeat Dongfang Bubai and regain control of the cult.

Linghu Chong becomes the new head of the (North) Mount Heng Sect, whose members are all nuns, after he unsuccessfully tries to save its leaders from masked assassins. He attends a special assembly of the Five Mountains Sword Sects Alliance called for by its chief, Zuo Lengshan. Zuo Lengshan attempts to coerce the other four sects into completely submitting to his leadership. However, he is defeated and blinded by Yue Buqun, who uses the Bixie Swordplay against him. Yue Buqun becomes the new leader of the alliance.

After leaving the assembly, Linghu Chong and Ren Yingying see Lin Pingzhi brutally slaying members of the Qingcheng Sect to avenge his family, and overhear a conversation between him and his wife, Yue Lingshan. Lin Pingzhi reveals that both he and Yue Buqun have mastered the Bixie Swordplay, which is unorthodox in practice because they need to castrate themselves to fulfil the prerequisite for learning it. Linghu Chong also learns that Yue Buqun, his respectable former master, is actually a villainous hypocrite who plotted an elaborate scheme against Lin Pingzhi to seize the swordplay manual in the hope of dominating the jianghu. Yue Buqun's wife and daughter die because of their respective husbands.

Yue Buqun schemes to kill Lin Pingzhi, who knows his secret and seeks to silence him. Linghu Chong, despite his reluctance to be enemies with his former master, ultimately chooses to stop him in order to foil his machinations for the sake of the innocent. The finale climaxes with the members of the Five Mountains Sword Sects Alliance being trapped in the cave on Mount Hua owing to Yue Buqun's treachery. The sword sects slaughter each other out of paranoia and distrust, ultimately leads to the alliance's dissolution. Linghu Chong paralyses Lin Pingzhi while Yue Buqun is killed by Yilin when fighting Linghu Chong during the frenzy.

After the collapse of the sword sects alliance, Ren Woxing plans an attack on the scattered and fragmented orthodox sects to unite the jianghu under the control of his "evil" Sun Moon Holy Cult. He tries to force Linghu Chong to join his side, but dies at a crucial moment from a stroke triggered by his own megalomania.

Ren Yingying becomes the new leader of the Sun Moon Holy Cult and successfully negotiates a truce between the orthodox and "evil" sides of the jianghu. Three years later, she passes the leadership to Xiang Wentian and marries Linghu Chong. Disillusioned by all the strife caused by power struggles, Linghu Chong and Ren Yingying retire from the jianghu and live happily ever after.

In the afterword, Jin Yong mentions that The Smiling, Proud Wanderer can be read as a political allegory disguised as a wuxia novel.[6] As an allegory, it can happen in "any dynasty or organisation".[7] Jin Yong also stated in the afterword that after the novel was published, Vietnamese politicians had once used the names of Yue Buqun and Zuo Lengchan as derogatory terms against one another in parliamentary sessions.