This article deals with the text of an important commentary of Laozi in the early Tang Dynasty by Li Rong. We shall analyze the academic position of the commentary and discuss the epistemological and ontological understanding found in this double-negation school writing. We shall deal with three important issues: the Dao discourse (including double-negation discourse), the self-cultivation discourse, and the governing discourse. We will attempt to answer a number of important questions. First, what was the starting point for Li Rong’s double negation thinking? Second, what is the ultimate meaning of double negation in Li Rong’s work? Third, what does Li Rong mean by the concept of the “void and ultimate origin” ( 虛極之理)? Fourth, how does Buddhist thinking influence Li Rong’s double negation? Finally, how does the divine differ from and interact with the secular? The core thesis will dwell on the concept that the ideal and sacred order fuses with the practical and secular order by way of the thinking of double negation. The ideas of mind (心) and essence or nature ( 性) -acknowledged as the essence of Dao (道性) in Li Rong’s commentary will also be important concerns in this paper. The paper will also touch upon some other important issues. First, it will explore the relationship between the Daoist School, Confucian School and Buddhism during the Han dynasty, Wei-Jin era and Sui-Tang era. Second, the hierarchy of the political and religious affairs will be expounded on. This will be followed by discussion on the body and the state, looking at whether the physical or mental should be emphasized, body formation in the state building process, and the Buddhist influenced interpretation of Laozi. The “Laozi Commentary by Li Rong” reflects the political and religious situation at the time and conveys the internal essence of the political discourses of Daoism, the Confucian School, and Buddhism on the Daoist religion. Undoubtedly this writing itself is a part of the process of state formation or building and the result of the dominance of political power during the Tang dynasty.