The Legend of Sword and Fairy 3 (Chinese Paladin 3) is an action role-playing game developed by the Taiwanese company Softstar Entertainment. It is the third installment in The Legend of Sword and Fairy (or Chinese Paladin) video game series, and serves as a prequel to the first game. The game incorporates elements of wuxia, shenmo and fantasy.

Fei Peng, a divine general from Heaven, fights with Chong Lou, the Lord of Demons. Neither of them is able to defeat his opponent and they gradually become less willing to destroy each other out of mutual admiration. Chong Lou challenges Fei Peng to another battle to determine the final victor between the two of them. Fei Peng hesitates, because he will break Heaven's laws if he agrees, but eventually succumbs to temptation. The battle between Fei Peng and Chong Lou lasts several days and draws the attention of the Heavenly Emperor, who sends his troops to arrest Fei Peng. Fei Peng is distracted and loses to Chong Lou. His sword is knocked away by Chong Lou and falls into the human world below. Fei Peng is punished for breaking celestial rules by banishment from Heaven into the human realm.

Fei Peng, now an ordinary human being, goes through the cycle of life and death numerous times, and is eventually reincarnated as Jing Tian, a young pawnshop worker in Yuzhou. He acquires a magical weapon, the Demon Sword, by chance. The spirit of Long Kui, the younger sister of Long Yang (one of Jing Tian's previous incarnations), resides in the sword, and she joins Jing Tian in his adventures.

At the same time, he meets Tang Xuejian, a girl from the prestigious Tang clan. He is drawn into the internal conflict within Tang's family and the clash between the Tang clan and the Thunderbolt Hall. Subsequently, Jing Tian meets Xu Changqing, an outcast of the Mount Shu Sect, and Xu's fiancee, Zi Xuan. He joins them in their quest to find the five elemental pearls, which can seal all evil spirits and monsters in the Monster-Locking Tower.