Based on the novel Smiling, Proud Wanderer by the Chinese writer Jinyong (also known as Louis Cha), the game is set in China of the Ming Dynasty (16th century). The player takes the role of Ling Huchong, a young student of martial arts, pupil of the famous master Yue of the Huashan school. One day, the teacher sends him to his friend, the master Liu Zhengfeng of the Hengshan school. On the way he encounters a dying man, one of the most prominent pupils of that school. He must now found the killers, and his skills in martial arts are put to a real test for the first time.
Xiao Ao Jiang Hu is an isometric action role-playing game. Ling Huchong can swing his sword, jump, talk to characters, as well as examine and pick up various objects (such as treasure chests or bodies of defeated enemies). All the battles are done in real time.