Fortune smiles on Inuyasha and his allies when they finally defeat their nemesis Naraku, who has caused them unrelenting hardships. Overjoyed by the long-awaited victory, they all hurry to resume their former lives, unaware that danger still lurks around. Kanna and Kagura, two of Naraku's subordinates, make arrangements to set free a sealed demonic entity that claims to be Kaguya, the legendary Princess of the Heavens.

Although preoccupied with their own endeavors, Inuyasha's group members reunite by a string of unusual coincidences involving Kanna and Kagura along with an inexplicable phenomenon of repeated full-moon nights. Upon realizing that Kaguya is behind the troubling events and that she holds a terrible power, they join forces once more to stop the disastrous fate she has planned for the world.