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The interactions between Chinese religions has occupied an enormous amount of scholarly attention in many fields because there have been direct and indirect consequences resulting from the interactions among Buddhism, Daoism, and Confucianism. These religious traditions have obviously influenced each other in many respects such as rituals, doctrines, textual materials, philosophy and so on. Accordingly, I will, in this paper, critically analyze the implications of the interactions between Buddhism and Daoism by examining Twofold Mystery. Since Twofold Mystery is heavily dependent on Madhyamaka Buddhist concepts, this study will, on the one hand, examine the influence of Madhyamaka Buddhism on the development of Twofold Mystery. On the other hand, it will critically survey how Twofold Mystery remained faithful to the Daoist worldview.