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As Blade tries to reconcile with his girlfriend Karyn, who works at the Crime Records Bureau, he enlists her help to track down Lu's accomplices and discover the mutagenic nature of the MTZ drug. It is revealed that the MTZ business is part of an underground Chinese Mafia operation led by Deng Hwang, a megalomaniacal drug kingpin intent on world domination. Blade also meets an old fortune teller, who tells him the present year coincides with that of the foretold coming of Chinese dragon Bahumat.

Blade disrupts the MTZ production schedule by blowing up the local drug plant, but in doing so he is spotted by Hwang's men. Hwang has the Jake captured in an attempt to lure Blade into a trap, but Blade manages to rescue the Jake and later sabotages the Triad's plans to poison the Hollywood reservoir with MTZ and exterminate the population of Los Angeles. In retaliation, Hwang has Karyn kidnapped and strapped to a chair, threatening to inject MTZ into her system.

Blade infiltrates Hwang's headquarters and, depending on the player's actions, either manages or fails to rescue Karyn. He eventually comes face-to-face with Hwang himself, who suddenly transforms into the dragon Bahumat. In a climactic final battle, Bahumat is defeated by Blade. Outside the headquarters, Blade is greeted by the mayor but angrily punches him for using Blade as a pawn in his crackdown operation and endangering his life and Karyn's. Blade then walks away either with Karyn, if she has survived, or alone.