Mulan is slashed in the chest by an enraged Shan Yu, and her deception is revealed when the wound is bandaged. As they solemnly leave the mountains, they are ambushed by the Huns, but the clever use of a rocket by Mulan creates an avalanche which buries most of the Huns. The troops set out to meet General Li, but arrive at a burnt-out encampment and discover that General Li and his troops have been wiped out by the Huns. Mushu, desiring to see Mulan succeed, creates a fake order from Li Shang's father, General Li, ordering Li Shang to follow them into the mountains. However, under command of Li Shang, she and her new friends at the camp, Yao, Ling and Chien-Po, become skilled warriors.
Mulan is initially misguided by Mushu in how to behave like a man, and starts a ruckus at the training camp. The ancestors are unaware that the statue of Great Stone Dragon failed to come to life, and that Mushu, a small dragon, is the one to go and protect Mulan. The ancestors then order their "Great Stone Dragon" to protect Mulan. Fa Zhou, Mulan's father, prays to his family's ancestors for the safety of his child. When her family learns of Mulan's secret departure, they are all very anxious. Mulan decides to take matters into her own hands, by putting on the guise of a man so that she can go to war instead of her father. When Fa Mulan hears that her elderly father Fa Zhou, the only man in their family, is once more to go to war, anxiety and apprehension grip her.
Each family is given a conscription notice, requiring one man from each family to join the Chinese army. The Huns, led by the ruthless Shan Yu, invade Han China, forcing the Chinese emperor to command a general mobilization.