In the year 1274, a Mongolian invasion fleet led by Khotun Khan lands on the Japanese island of Tsushima. Jin joins with the rest of the island's local samurai, led by his uncle Lord Shimura, in an attempt to repel the invasion. However, the battle ends in disaster, with the entire samurai army killed, Lord Shimura captured, and Jin grievously wounded and left for dead.

Jin is found and nursed back to health by Yuna, a local thief, who informs him that most of Tsushima has already fallen to the Mongols. Jin then attempts to storm Khotun's stronghold at Castle Kaneda in an attempt to rescue Lord Shimura, but is unable to defeat Khotun in combat and is thrown from a bridge. Realizing that he cannot defeat the Mongols by himself or with the traditional samurai fighting style, Jin begins scouring the island to recruit allies and learn new fighting techniques to aid in his quest to rescue Lord Shimura.

He manages to recruit Yuna, her brother Taka, the master archer Ishikawa, the female samurai Masako, and his old friend and mercenary Ryuzo. As Jin kills more and more Mongols, the locals begin to revere him as the "Ghost of Tsushima". Taka crafts a special climbing hook that will allow Jin to scale the walls of Castle Kaneda, and he calls for his allies to commence the rescue mission. Despite Ryuzo attempting to betray Jin to collect the bounty on his head, Jin is able to free Lord Shimura and retake Castle Kaneda.

However, despite the victory, Khotun had already left to conquer Lord Shimura's castle. In order to retake Castle Shimura, Jin continues to recruit more allies, such as Norio and his warrior monks and the soldiers of clan Yarikawa. Lord Shimura meanwhile recruits the local pirate Goro to smuggle a message to the Shogun for reinforcements. With a new army under Lord Shimura's command and reinforcements from the Shogun on the way, Jin recovers his family's ancestral armor and heads out to confront Ryuzo.

Jin ends up being captured by Khotun, who asks him to surrender. When Jin refuses, Khotun kills Taka as punishment. Jin is able to escape just as the Shogun's samurai reinforcements arrive. Lord Shimura then leads a full assault on Castle Shimura, and are able to push the Mongols into the inner keep. However, Khotun resorts to unconventional tactics that inflict massive casualties on the samurai.

Realizing that more lives will be unnecessarily lost in another frontal attack, Jin decides to poison the Mongols instead. Jin infiltrates the castle and sneaks poison in the Mongols' food. He then confronts Ryuzo again, but is forced to kill him when he resists. While the castle is taken bloodlessly, Khotun again has left to campaign further north, while Lord Shimura is furious that Jin would resort to a tactic as dishonorable as poison.

Knowing the Shogun will want to have someone executed as punishment, Lord Shimura asks Jin to blame Yuna as a scapegoat, but Jin refuses. He is arrested for his crimes, but manages to escape when Yuna learns the whereabouts of Khotun. As Jin tracks Khotun, learns to his horror that Khotun has learned how to create the poison he used and is now using it against the island's residents.

Jin gathers his allies again and assaults Khotun's final stronghold in Port Izumi. He manages to infiltrate the port and kill Khotun on his flagship. With Khotun dead, the Mongol invasion loses its momentum and the tide turns in samurais' favor. Jin is summoned by Lord Shimura, who informs him that since the Shogun considers the "Ghost" a threat to the stability of Tsushima, he has ordered Jin's execution.

Both Jin and Lord Shimura reluctantly battle each other, with Jin ending up the victor. Jin has the option of either sparing Lord Shimura's life or killing him to give him a proper warrior's death. Regardless, Jin will now forever have to live his life on the run as a wanted man.