- "I am the Water Dragon, immortal guardian of the path to the underworld. I shepherd the dead, leading them to my holy temple in Dirge, the gateway to the afterlife".
- –The Water Dragon
The Water Dragon is a Goddess; the Player character's guide throughout the events of Jade Empire. The Celestial Bureaucracy gave the Water Dragon two very important tasks: first and most obviously, to supervise the distribution of water supplies and rainfall to the mortal world, and second and more secretly, to shepherd the souls of the dead along the Great Wheel – the cycle of life, death and rebirth. Although her true form was indeed that of a massive blue dragon, she often took the form of a woman in blue with scaled skin and clawed hands. She makes her presence known in Chapter 1 and Chapter 2. She helps the Player in the Chapter 5 by resurrecting him/her. She also grants the Player a choice of two different magic styles, Dire Flame and Ice Shard, after the Spirit Cave is explored. She appears in "Heaven", after the Player approaches Forest Shadow in the Great Southern Forest and the Player is given the knowledge that this spirit is in fact the Water Dragon.
For thousands of years, the Water Dragon guided the souls of the dead through the Underworld so they could be reborn. She was attended at the Temple of Dirge by the Spirit Monks. However, when the Long Drought devastated the land, Emperor Sun Hai decided to step beyond his station and usurp the Water Dragon's power. The Emperor ordered his brother, Sun Li, to lead an assault on Dirge. When the Imperial Army finally broke through, Sun Hai entered the temple and seized the Water Dragon's Heart, taking her power for his own. With her power, the Emperor was able to end the Long Drought. As a result of the Emperor's actions, the dead lost their guide and ghosts became a frequent problem throughout the Jade Empire.
The Emperor took the Water Dragon's body to the Imperial Palace and set about slowly consuming her power to become a god. However, even in her weakend state, the Water Dragon was able to reach out and appear to the Last of the Spirit Monks. The first time she appears, is in the Spirit Cave when the Player finds the Dragon Amulet. She explains what the amulet is and what it is capable of. As the game progresses, the Water Dragon explains the reason for the increased appearences of ghosts throughout the Empire and the events that led to the sacking of Dirge. After the Player is betrayed by Sun Li, she guides the Player back to the land of the living.
When the Player returns to the Imperial Palace, they encounter the Water Dragon's body within the tombs. Here the Player is presented with two options. If the Player is a follower of the Way of the Open Palm, the Player can break the machine that is keeping the Water Dragon's body alive, allowing her reincarnate and thus allowing the cycle of life, death and rebirth to resume or if is a follower of the Way of the Closed Fist, the Player can taint her power with blood; allowing them to take the Water Dragon's power for their own.
If the Player decided to destroy the Water Dragon's body, her spirit is set free upon the death of Sun Li allowing the cycle of rebirth to continue. If the Player decided to take the Water Dragon's power, the Water Dragon's spirit is enslaved after the defeat of Sun Li so that the Player can become a god.