The climax of "Princess Mononoke" involves Lady Eboshi successfully decapitating the Forest Spirit as it transforms into its Night Walker form. This act, however, does not grant immortality as believed, but instead unleashes the spirit's destructive power. Its headless body begins to exude a black ooze that instantly kills any life it touches, threatening to consume both the forest and Irontown. The central conflict shifts from a war between humans and nature to a desperate race to return the spirit's head before the world is destroyed.
During the chaos, Moro uses the last of her strength to bite off Lady Eboshi's right arm before she dies. Ashitaka and San work together to retrieve the head from the monk Jigo and return it to the Night Walker just as the sun rises. Upon receiving its head, the spirit's destructive form collapses, and in its death, it unleashes a wave of life that heals the land and lifts Ashitaka's curse.
The ending is bittersweet and defies typical fantasy conventions. The Forest Spirit is gone, and many gods, including Moro and the boar god Okkoto, are dead. Lady Eboshi, humbled and having lost an arm, vows to build a better, more harmonious town. Crucially, Ashitaka and San do not end up together in a traditional romantic sense. San admits she loves Ashitaka but cannot forgive humans, choosing to remain in the forest. Ashitaka decides to help rebuild Irontown. They agree to visit each other, representing a fragile but hopeful truce and the possibility of a future where their two worlds can coexist. The final shot of a single Kodama appearing in the newly green forest signifies that nature will endure and that the cycle of life continues.