The story of Scarlet Covenant unfolds in a fictional era resembling the Sengoku period of Japan (1467-1615). It is set in a remote village surrounded by continuous mountains, hidden within dense forests, isolated from the outside world. In this ancient village, made of wooden houses and stone paths, the villagers live a life disconnected from the outside, their daily rhythms closely tied to nature, especially the mysterious red moon that graces the sky.

Ancient legends link the phenomenon of the red moon to a set of ancient rules within the village. Whenever the red moon rises, all women aged 10 to 50 experience menstruation, believed to be connected to supernatural powers. Simultaneously, all women must adhere to eight rules passed down by the elders through generations. These rules, said to have been established to quell an ancient calamity, include strict behavioral codes such as seeking refuge in designated shelters during the red moon and avoiding direct eye contact with the moon or touching anything red. Designed to protect the community from vengeful spirits lurking in the darkness, these rules are guarded by a deeply respected elder who is not only the guardian of tradition but also a vanguard against evil forces.

The protagonist, Yuki, a 17-year-old village girl with a rebellious nature, encounters the true essence of evil spirits through a breach of the rules — remnants of the spirits of women who had failed in their attempts to challenge these ancient regulations. These spirits revealed that liberation could only be achieved by bravely challenging these rules. After a series of tests of courage and wisdom, Yuki finally breaks the rules and authority that had bound her, leaving behind the village where she had lived for 17 years, and the invisible crystal sphere enveloping this world also shatters. However, her escape is just the beginning — she finds herself in another 'instance' of the village, where the rules are more humane, but new rules and crystal sphere worlds await her.

Life in the new village makes Yuki realize that true freedom is not just about escaping physical constraints but overcoming inner fears and boldly exploring the unknown. Each challenge not only shapes her personality but deepens her understanding of the relationship between freedom, tradition, and change. Yuki's journey becomes a continuous cycle, with each 'instance' serving as a step in her process of self-discovery. She continuously grows through challenges and transformations, eventually becoming a truly free spirit.

Scarlet Covenant is narrated from the perspective of Yuki telling the story to her sister Jojo in this world, with a focus primarily on the introduction of the rules themselves, indirectly revealing her identity as a traveler and the truth of this world.