Doku is the Lord of the Greater Fiends and is sent by the Holy Vigoor Emperor to retrieve the Dark Dragon Blade. Doku attacks Hayabusa Village with his samurai army consisting of infantry, cavalry, archers, mages and one Cavalry Captain, Masakado. Ryu arrives in the village and solemnly discovers the corpses of many of his colleagues. Ryu discovers Ayane nearly unconscious in a building. She warns him of a dark Samurai, and tells him that he must find Kureha, the village Priestess. She presents him with a bow after she stabilizes.
After killing several of Doku's samurai, Ryu visits an effigy to the blacksmith Muramasa. He is able to communicate with Muramasa via these statues and is now capable of outfitting himself. He concludes his business with Muramasa and acquiring several armlets that can increase his offensive and defensive abilities.
After Ryu dispatches most of the attacking force single-handedly, and he destroys the Cavalry Captain and his entourage as well. Ryu then arrives at the Hayabusa Clan Leader's Residence to see Kureha murdered. She reaches out to Ryu on the footsteps of the residence and clutches the Dragon Eye in her hand. But, she dies before Ryu can intervene. Doku then appears, retrieves the Dark Dragon Blade and dispatches one last Hayabusa Clan ninja. He and Ryu then square off and exchange a few blows. Doku proves the more powerful duelist though, as he strikes Ryu twice, grievously wounding him.
It is a matter of debate now as to whether or not Doku kills Ryu at this point. He strikes him first in the lower abdomen, which causes Ryu to cough up blood. He then slashes him from shoulder to scabbard, and it appears as though the sheath of the Dragon Sword at least partially protects him from the Dark Dragon Blade's ability to absorb souls. It could be this or a combination of several factors as discussed in the FAQ's section. The flames that engulf Hayabusa Village eventually die down after consuming the area. We see Ryu lying defeated on the ground, and he looks to be either very mortally wounded or outright expired. It is wise to note that the fires have all extinguished at this point, so Ryu has been lying motionless on the ground bleeding for at least several hours. At this point, a lone falcon then flies in and observes the scene. This is not the last time that the falcon is observed in this story.