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The story is set in legendary China. A beautiful female fox spirit named Dakki So is controlling the emperor Chuu-oh and the ruling In (Yin) dynasty, and is using her power over him to do evil in the nation. An immortal-in-training named Taikoubou is chosen by the great immortal sages for the Houshin Project — to seal away or destroy the evil demons that infest the world. In the course of his adventures, Taikoubou gathers other powerful companions and sets out to seal away the demons and eventually destroy Dakki herself.

The 23 manga book series follows the adventures of Taikobo and his trusty "Reiju" ('Spirit Beast' or 'Riding Beast') Supushan. Taikobo was given a mission by Genshitenson (Taikobo's mentor and the leader of the Sennin World - Konrong) to complete the Hoshin Project.
The goal of the Hoshin Project, as explained by Genshitenson, is to trap Dakki and her minions in a 'middle' world between the Sennin World and the Human world, renamed 'Shin' (Deity or Gods) World (Named 'Shinkai' in the English version). Taikobo's mission is to hunt down the 365 people whose names were written on the Hoshin Scroll. As Taikobo defeats and seals off each of the 365 people on the scroll, their souls are instantly transported to the Hoshindai (a floating island made to trap souls) and sealed there for all times.
At first, Taikobo refused to take up such a troublesome mission but when threatened with expulsion from Konrong, he quickly relented. After that, he was given a "Paope" (magical weapons that harness spiritual energy and environmental elements) - Dashinben (打神鞭) (a Wind element weapon) as well as Suppushan (a flying, talking Hippo).
Upon leaving Konrong, Taikobo and Supushan immediately met up with the first person listed on the Houshin Scroll, the all powerful Shinkohyo and his Riding Beast - Kokutenko. After a short battle between the two Doushi, in which Taikoubou was easily defeated, Taikoubou came to a realisation that there was no way he could take on all 365 minions on his own. That's why he set off searching for strong fighters to join him on his quest to rid the world of Dakki. Taikoubou soon met up and joined forces with Nataku, Raishinshi, Ko Tenka and Youzen.
As the series progress and due to several failed attempts at killing Dakki, Taikoubou slowly realises that there is no hope in disrupting Dakki's strangle hold on the Yin Dynasty or her influence over Chuuoh. As such, he abandoned the kingdom and requested that Ki Sho form a new Monarchy to rival the Yin, renamed the Sho Dynasty with their new emperor - Buoh. Taikoubou then became the Military advisor to Ki Sho, helping the Western Army conquer the lands once owned by Yin.
Bunchuu, the senior advisor to the emperor Chuuoh in the country of Yin and also a Doushi, sees Taikoubou as an obstacle and sent out some of his best Doushis companions to attack Taikoubou and company. The ensuing fights between the two groups eventually lead to the involvement of almost all members of the 2 Sennin Worlds - Konron (where Taikoubou originates) and Kingoto (where Bunchuu learnt his arts). At the climax of the Sennin war, both worlds were completely destroyed with hundreds of souls sealed into the Houshin Dai. And though Bunchuu was eventually defeated, Taikoubou lost many friends and his home in the process.
Eventually, after Taikoubou and the Sho army successfully defeated Chuuoh and officially declared the fall of the Yin Dynasty, Taikoubou and company decided to leave the Human world and return to what's left of the Sennin world. It is then revealed to him that there is possibly a third Sennin World, one that belongs to Dakki, and is probably where she and the last of her minions fled to when the Yin country was finally conquered.
Genshitenson also reveals to Taikoubou that the real goal of Houshin Project isn't just about defeating Dakki, it is about defeating the eternal being supporting Dakki throughout all her chaos years - Jyoka, one of the ancients.
The ultimate enemy of Houshin Engi - Jyoka is a "Jui Que", one of 5 aliens which landed on the Earth millions of years ago. Jyoka had a dream to recreate her home world on Earth (which had self-destructed some time ago), but the other aliens disagreed and enclosed her in a glass cage. Later, she was able to move about in her "soul" form and direct the trend of history to her liking. This is when she met up with Dakki and the two started working together to make Jyoka's dream come true. Each time history diverts from what Jyoka wants it to become, she completely destroys the civilisation that existed and started all over again, like a child moulding a perfect sand castle. No one really knows how many civilisations Jyoka had destroyed throughout time in her pursuit to perfectly replicate her old home, but when asked why she's trying to do this, Jyoka simply wonders if her home planet had not made those simple mistakes that led to its own destruction, what would have happened then.
After hearing the ultimate truth, the Sennins retaliated against Jyoka. Soon, she finally decided to destroy Earth once and for all, and find another world in order to replicate her old home. The battles raged for a while before the deceased Taikoubou (who had 'died' recently) reappeared in front of his comrades again. This time, it is revealed that he was once one of the "Jui Que" as well, the last of the 5 aliens and was left on this earth for the sole purpose of killing Jyoka once and for all. Using the energy of his friends as well as those souls trapped in the Houshin Dai, Taikoubou (now renamed 'Fukki') was finally able to defeat Jyoka and release the world from her influences.
Just prior to this happening, Dakki somehow managed to take over Jyoka's body for a time and merged with the life energies of the Earth, becoming the mother of all life. In Taikoubou's second dying stage, Dakki came and saved his life.