"Fire on the Mystic Island"
At Horai Island, six half-demon children, Asagi, Dai, Roku, Moegi, Shion and Ai watch a Kikyo look-alike develop in a green orb, then stand in front of the Cauldron of Resonance while it comes to life. Four scars, the mark of the Four War Gods (Ryuura, Juura, Kyoura and Gora), appear on all of the children's backs, except Ai. Asagi tells Ai to leave the island while she does not have the mark. After Ai leaves, The Four War Gods find out and try to retrieve her, but InuYasha and the others defeat Gora and save Ai, who asks them on Horai Island. Later, InuYasha explains the myth Horai Island, which appears once every and recalls fifty years ago, when he and Kikyo went there to meet the half-demon children, the Four War Gods attacked them. Gora sucked some of Kikyo's blood and creates her doppelganger, and Ryuura marked InuYasha's back with the scar, saying that he would never be free from them with the scar on him. The gang decides to head to Horai Island to investigate.
The villagers panic upon seeing the island. In a small hut, Kikyo listens to a man's tale of Horai Island and leaves, saying she would defeat the demons. The rest of the villagers rush to the shrine and start praying for divine protection; Kyora appears and proceeds to burn down the shrine and kill many of the villagers. Sesshomaru arrives and drives him off. After the battle, he remembers back to his first encounter with Kyora, when he was marked by the scar; he has a personal vendetta. As InuYasha and company near the island, Jura appears and fires his Thunder Cannon at them, destroying their boat. Miroku and Sango fly away on Kirara, pursued by Jura, while InuYasha, Kagome and Ai escape to the beach, where they meet Ryura. In the ensuing fight, Ryura nearly kills InuYasha, but Kagome stops him by firing a sacred arrow. Ryura is forced to retreat when he sees his hands faded out of existence, but not before he hurls some insults at InuYasha. Ai leads the group to the village, where they find Asagi singing together with the other four children. When InuYasha reveals his plan to confront the Four War Gods, Asagi begs him to reconsider, saying they will all be killed. The gang learns that Asagi is going to sacrifice herself to the Cauldron of Resonance, and she argues her death will allow the others to live a little longer. They all follow Asagi to the Cauldron, where InuYasha attempts to destroy it with failure. Suddenly, he and Asagi are pulled inside as it closes. Outside, the rest of the gang and the children try to open the doors, while on the inside, InuYasha feels his strength waning. Lady Kanade, the priestess who fought the Four War Gods fifty years ago, appears and lends her strength to InuYasha, along with the War Gods' power spheres in a box, telling him it must be destroyed as soon as possible and never opened. In return, she asks InuYasha to save the children, then gives her blessing to Asagi before she disappears. InuYasha destroys the door of the Cauldron with Adamant Barrage, accidentally breaking Kagome's bow in the process.
The Kikyo look-alike appears and takes the power spheres from InuYasha who chases her to the War Gods, where she opens the box, releasing the spheres to their owners. While Kagome,Shippo and the children attempt to make a raft to escape, the Kikyo doppelganger attacks InuYasha. At the Cauldron, Sesshomaru appears and finds Kyora waiting for him. Sesshomaru easily defeats him with another Dragon Strike. Meanwhile, Miroku and Sango fly on Kirara to confront Jura and the resurrected Gora. Using his Wind Tunnel, Miroku redirects Gora's blasts so that it hits Jura and Sango finishes him off with Hiraikotsu. Meanwhile, InuYasha battles with the fake Kikyo and is about to lose when the true Kikyo appears and defeats the impostor, then leaves her bow behind. InuYasha finds Ryura attacking Kagome and the children, and he kills him with his Wind Scar. With only Gora remaining, Miroku spears Gora's head with his staff, greatly weakening it. With InuYasha's Backlash Wave, he kills the last War God. However, all the power spheres combine to create the true War God. Although a combination of Kagome's sacred arrow and InuYasha's Backlash Wave can destroy it, she cannot fight because her bow was broken. The fireflies, spirits of the previously sacrificed island residents, lead the children to Kikyo's bow and they bring it to Kagome. Finally, Kagome's arrow purifies the War Gods' attack and, with the fireflies' blessing, InuYasha unleashes his Backlash Wave with his Adamant Barrage, killing the fireflies and the War God. As the gang and the children leave the island, it vanishes into the broken time line.
During the credits, it is indicated that the children spend some time with Kaede's villagers, before departing to face the world by themselves.
