The core of Daoism is, of course, Dao ( the Way). It is said that Dao is the origin of the universe, the basis of all existing things, the law governing their development and change, and the ultimate god of Daoism. The Dao is not only transcendent, but is the immanent, observable way of the universe, "the norm, the rhythm, the driving power in all nature, the ordering principle behind all life" (Smith). We see it in the yin and yang polarities underlying everything, in the self-balancing Organism of Nature, the flow of forces making up the universe. Dao is also the way of human life when it flows in harmony with the way of the universe as described above. This life enjoys the supreme effectiveness of operating by Dao's power, or de.

The concept of Virtue (De) is closely related to Dao. Dao De Jing relates, “All respect Dao yet value Virtue.” Daoists regard Dao and Virtue as the general principles of their beliefs and behavior. They should not only cultivate Dao but also accumulate Virtue. Therefore, both Dao and Virtue serve as the basis of Daoist doctrines. Derived from the foundation of Dao and Virtue are a whole set of principles, including non-action, non-passion and non-desire, non-struggle, and the pursuit of simplicity and truth.