Katherine McDonald challenges Ayano to a fight. While awaiting for the day of the fight Katherine hires Kazuma to be her coach, and falls in love with him. As a result, Katherine makes a proposal to Ayano: if she wins, she takes Kazuma back to America with her, and if she loses, he stays. Ayano ends up winning, but Katherine decides to stay anyways.

Jūgo once again sets up Ayano and Kazuma, but this time he gets her friends to invite the two to a hot spring. Just when things seem to go Jūgo's way, Detective Tachibana and Genma, Kazuma's father, end up at the same hot spring as Kazuma. Every time they meet each other, Genma and Kazuma fights and ends up destroying miscellaneous sections of the hot springs. However, in the end, it seems that their fights were just their way of communicating with each other.

Normal teenagers, who were once weak or have been hurt, become magicians in enormous amounts. Not only are these "magicians" taking advantage of their newly acquired powers, but they also talk like they are playing a game, using words such as "level up." Kazuma, Ayano, and Nanase are asked to investigate the problem, and Nanase shows just how a normal teenager can beat a magic user. Kazuma sees Tsui-Ling after defeating one of the new mages.

Ren and his friends encounter one of those "magicians" during one of their outings and are attacked by a fire-using one. Ren uses his powers to defeat the "magician," who reveals information on the whereabouts of the "game" known as Pandemonium. Ren decided to check the place suspected to be the headquarters with this information, discovering that it is in another dimension. As he prepares to leave, he is suddenly teleported inside the building. Meanwhile, Tachibana calls for Kazuma to regroup at the Kannagi's place to discuss further plans.

Kirika briefs everyone about the recent events and its connection to the game Pandemonium which caused the players to "download" youma through the net unknowingly. After they learn that Ren has been kidnapped, Kazuma, Ayano, and Tachibana enter Pandemonium. Ayano fights Lapis, who has the appearance of Tsui-Ling. Meanwhile, Kazuma finds Ren, and identifies the man behind Pandemonium as Bernhardt Rhodes, a former enemy he defeated in the past.

Kazuma questions Bernhardt about Lapis and denies that the girl is Tsui-Ling, whom Bernhardt sacrificed to a demon. Bernhardt in turn, replies that the girl Lapis is what remained of Tsui-Ling whom Kazuma failed to protect due to his lack of power. As Kazuma attempts to attack Bernhardt, Lapis deflects the blow and shows her power as a "Swordsmaster" by slicing in half the building they were in. Kazuma saves Ren, Ayano, and Kirika but disappears soon after. Back at the Kannagi home, Kirika informs them that a new Pandemonium has appeared and has granted "class changes" to some of its players. Meanwhile, Kazuma, brooding over the happiness of his past with Tsui-Ling, resolves to kill Bernhardt and Lapis.

Since the new Pandemonium appeared, battles held every night which pitched "magicians" together in a battle and the winner gains experience points. Kazuma appears at these battles, brutally attacking the combatants and asking them on the location of Pandemonium. He goes so far as to assault Katherine and allow Nanase to be kidnapped. Afterwards, Tachibana informs Ayano that Kazuma has regressed to his former cold-hearted persona, and only Ayano can bring him back.

Ren, Suzuhara and Serizawa witness Kazuma battle with one of the magicians. Later, Yukari goes to a meeting of seeds, where Utsumi tells them that Pandemonium will appear in the park at midnight and that they may achieve great power if they went there. At Pandemonium, Utsumi tells Bernhardt that he wants to take over and that he will kill Bernhardt. However, Bernhardt responds by saying that he was the one who gave Utsumi power in the first place.

At the hospital Katherine speaks with Ayano, and increases her resolve to save Kazuma. Ayano and Ren convince Jugo and Genma to let them try to bring Kazuma back after Genma states that he will kill Kazuma and Bernhardt. When Pandemonium appears, Ayano and Ren encounter Kazuma. Kazuma tells Ayano and Ren that he is not trying to destroy Pandemonium because of Tsui-Ling but simply because he wants to kill Bernhardt. Ayano summons the Enraiha and attacks Kazuma. She thinks about what she learned from Kazuma and unknowingly uses the Crimson Flame. She manages to convince Kazuma to stop killing innocent people. Kazuma realizes that he has someone new in his life that has great importance—Ayano—and the three set out to destroy Pandemonium.

Kazuma, Ayano and Ren encounter Lapis, who begins the summoning ritual of Belial, the King of Demons. Lapis reveals she is attempting to become "human" through others' pain. Kazuma and Ayano attack Lapis, who retreats as Belial's summoning proceeds. By combining their powers, Kazuma, Ayano, and Ren manage to repel Belial. Afterwards, Bernhardt and Lapis return, but Gemna's arrival convinces Bernhardt not to kill them. Kazuma asks Lapis what were the final thoughts of Tsui-Ling, who reveals that Tsui-Ling wanted Kazuma to die. At the Kannagi residence, Kazuma reveals he has accepted his past and will concentrate on the future, which incenses Ayano, who claims that Kazuma should rely on her. Kazuma agrees, but gives Ayano a tap in the rear to show his acceptance to the new partnership, resulting in Ayano angrily chasing him around the courtyard as the members of the Kannagi family, Ren's and Ayano's friends, and Tachibana look on amused how close the two are.