Xianghua's ancestors of the Chai family have groomed men and women into seasoned warriors of China for generations. A woman named Xiangfei was sent to the prestigious Ling-Sheng Su Temple to learn the swordplay and became supremely skilled with the jian. Following her father's passing, Xiangfei forged a forbidden romance with Kong Xiuqiang, a monk at the temple and the most prominent candidate for inheritor of the holy bo staff, the Kali-Yuga. Not until the illegitimate birth of their first daughter, Xianglian, was their love made known to the other monks who remained very strict regarding the temple's edicts and so Xianglian was taken from her parents on her second birthday. Xiangfei became too wrought with grief to remain at the temple. Han Dongxiu, a sworn brother of Xiuqiang and Xiangfei, helped Xiuqiang sneak the holy Krita-Yuga sword to his lover, to serve as a promise the two would one day meet again. Unknown to Xiuqiang was that when Xiangfei, pregnant with a second child, had left the temple, secretly returned to her homeland, was taken in by the Chai home there, and became a soldier in the Ming Dynasty Imperial Guard, the Jinyiwei. Months later, she gave birth to her second daughter, Xianghua, but never revealed anything about the girl's father or his lineage to her. By this time, the temple had found that Xiuqiang had stolen the Krita-Yuga and he was exiled from the temple, but Xianglian was to remain there to be trained as an orphan. Xiuqiang eventually discovered Xiangfei's whereabouts, but the Chai family asked him to leave her alone, as she would be happier in her ignorance. When monks from the Temple came to Xiangfei, searching for the missing sword, all they found was young Xianghua playing with a battered jian, and they gave up the search years later. Only Xiuqiang knew that Xianghua's sword was actually the Krita-Yuga in disguise. As time passed, Xianghua had learned to use it just as well as her mother when Xiangfei died after her 11th birthday. Five years afterward, Xianghua became a member of the Imperial Guard.
Prior to the events of Soulcalibur, the Emperor became displeased with the search for the "Hero's Sword" as he never heard back from any that had ventured out, including close friends, so he sent members of his Guard to help the quest advance. The guards would travel undercover under the guise of a traveling opera troupe, with Xianghua to be the main attraction, so as not to raise suspicion of their true motives. As Xianghua prepares for her journey, she recalls her mother's dying words that she was born to complete an important task and cut a path through an uncertain future. With her mother's keepsake jian, Xianghua left on her own, after cutting her hair short like her mother's. On her journey, she encounters a Ling-Sheng Su member Kilik and a Ryūkyū pirate Maxi. Told of the sword's evil nature by Kilik, she agrees to aid both of them in their quest to destroy it, not knowing that her long-lost older sister Xianglian was accidentally killed by Kilik when he was consumed by a berserker-style rage. (In Soulcalibur manga adaptation, Xianghua meets Edge Master in the middle of her journey. Later, Xianghua and Li Long's sister Meimei are forced to fight through a Lizardmen invasion of an Indian town and Meimei is killed in battle. Xianghua is rescued by Kilik and Maxi in their first meeting, and her Krita-Yuga suddenly transforms into the Soul Calibur, destroying the Lizardmen.) Together they storm the evil-infested Ostrheinsburg Castle in Europe. Maxi stays behind and defeats Astaroth, disappearing soon after, while Kilik and Xianghua slay the demon hordes and reach Soul Edge. Kilik uses his holy bo staff Kali-Yuga to defeat Nightmare, but immediately afterward, Xianghua is pulled into an ethereal void to face Inferno. Her mother's keepsake sword unveils herself as the holy sword and Xianghua defeats Inferno after a fierce struggle. As the void started to collapse, she carries Kilik out of it, though her sword is left behind. A mysterious man awards her with an unnamed jian in return for the great deed she has done.
Xianghua keeps her role in Soul Edge's destruction secret and never reports it, but is stripped of her rank and reassigned to a menial position for her failure to retrieve the "Hero's Sword".
Four years later (the timeline of Soulcalibur II, Soulcalibur III and Soulcalibur IV), news reach her that the Emperor destroyed and massacred Xiwei, the center of government in the Empire's western territory under the public justification of a revolt, believing that the fortress had been withholding Soul Edge from him. He asks Xianghua to investigate the ruins, as her experience could be useful in locating the sword among the rubble. Xianghua finds out the truth behind the attack from Ming spies. Though she believed that she had destroyed Soul Edge, pieces of it are rumored to exist in this place and so Xianghua decides to find every fragment and destroy them. She lefts on a second journey alone, convinced that this was a burden she has to bear after she failed to destroy Soul Edge completely the first time. During her adventure, Xianghua is reunited with Kilik. While on their journey, they are attacked by Zasalamel, who gravely injures Kilik. Xianghua takes Kilik back to his home, where she hears that he would make full recovery. After leaving a letter for him, she departs seeking an old general whom Edge Master has arranged for her to meet. Training with the general, Xianghua's skills improve significantly but she is unable to shake off an overwhelming feeling of inadequacy due to her failure to help Kilik. On the general's sage advice, she then begins to train her mind to become more fluid and allow her heart to filter in both the good and the bad. After months of training, she feels that she was ready and bid farewell to the general, beginning her journey anew to fight by herself. While traveling west on the Silk Road, she reunites with Kilik. Together they travel to India to find Maxi, but he does not join them. Xianghua swears to destroy the Soul Edge properly and once and for all.
A few years later, Xianghua again reunites and connects with Kilik, but he considers this the result of an unfortunate destiny, and eventually disappears. Returning to her homeland with a broken heart, she realizes she is pregnant. However, her grandfather and patriarch of the Chai house is furious at this, as Xianghua is the second generation of women from such a distinguished family to bear the child of an unknown man, and she is ordered to kill the child and marry into another family. Xianghua is rescued by the heir of the Yan family, Yan Wujin, who issues a condition for marrying Xianghua and not revealing the scandal, to allow the child, a boy named Xiba, to live (Xiba was then raised by Kong Xiuqiang). She later gave Wujin a daughter named Leixia.
During Xianghua's early design phase, several concepts were considered for her attire, before settling upon a light and oriental appearance for her. Additionally it was considered to have her appear as a young girl instead, or alternatively for her to fight unarmed using martial arts, an idea later put to effect through Tekken character Heihachi Mishima in his guest appearance in Soulcalibur II. Xiānghuà means "fragrant flower" in Chinese if each character is taken literally. She is officially described as "Flower in the Breeze" and uses an elegant fighting moves based on a nimble footwork.
Gameplay-wise, Xianghua is regarded as one of the better characters in Soulcalibur II. In Andrew Alfonso's GameSpy guide, she is described as a character "that can win without too much effort. Xianghua is definitely not a hard character to learn, and a lot of her strengths come through poking and landing launchers for combos." Similarly, Eurogamer's Matt Edwards opined that Xianghua in this game "trounces most of the competition thanks to her safe pressure and decent combos." BradyGames' official guide also noted that, unlike a fellow "up-close fighter" Talim, "Xianghua can deal a nice bit of damage" with her attacks. According to Hardcore Gamer, while Xianghua in Soulcalibur IV "is still unpredictable and juggle-happy, and does more damage than she used to—in exchange, she’s been given more recovery time on her moves (...) and her old juggle tactics are tougher to pull off."
Xianghua figurines were released in Japan by several manufacturers, including Duck Tail, Epoch, Wave, and Yujin. As a tribute for the acclaimed Soulcalibur player Kayane, whose favourite character was Xianghua, Namco created a tribute AI named "Kayane" in Soulcalibur: Broken Destiny, imitating her playing style. Xianghua's fighting style was eventually given to her daughter Chai Leixia in Soulcalibur V. Comparing the two characters, Kayane opined that while Leixia seems unfinished, she displays some individual characteristics and is not merely "a simple copy" of Xianghua.
The character was well received by game critics and has been noted for her sex appeal. Both David Rakoff of The New York Times and Darek Pasturczak of Wirtualna Polska called her "beautiful but deadly." Dreamcast Magazine ranked her as the seventh top "girl on the Dreamcast" in 2000, commenting: "With an oriental flavour to her moves and style, Xianghua is a bit of a minx even though she looks sweet and innocent." GameSpy's Dave Kosak wrote a better translation of Xianghua's victory one-liner could be "Don't you want to just lick me up and down like a popsicle?" and GamesRadar's Shane Petterson described her official artwork for Soulcalibur IV as "screwing you with her eyes." Arcade Sushi's John Llewellyn Martin called Xianghua one of the series' "most beloved characters" and Kotaku's Alex Jaffe listed her among "the world's best fighting characters".
According to IGN's Jesse Schedeen "Xianghua may be traditional in some ways, but she certainly doesn't dress like it. She has one of the more unique costumes in Soulcalibur IV, a hodgepodge of different Oriental fashions that come together in one sexy look. Never before has a kung fu hero been such a babe." In 2014, Julia Cook of Paste ranked Xianghua as the second "best dressed lady" in all video games for her collection of varied "tight outfits with flowy, feminine accoutrements" from "brightly colored capris under dresses or robes, sometimes with a sleek tiara" in early games to "a more masculine blazer and shorts combination for Soul Calibur IV." GameSpy's Kosak as well as well as Crunchyroll's Nate Ming expressed annoyance of Wendee Lee's "barely-repressed Flatbush accent" in the English voice track version. Soulcalibur V was widely criticized for removing several fan-favourite classic characters, including Xianghua. Nevetheless, Thomas Nickel of Eurogamer Germany opined Leixia "represent[s] an equivalent replacement of Xianghua."