In his writing, “Xiaoyaoyou” (逍遙遊), Zhuangzi uses parables to express his profound and innermost spiritual world. His artistic conception and approach inspire ongoing research by subsequent generations. Fang Yizhi analyzes numerous ancient and modern interpretations of Zhuangzi’s piece, applies Confucian, Buddhist, and Taoist thinking, and uses his unique writing method to interpret the rich content in Zhuangzi’s writing. In the present article, important concepts of Fang Yizhi’s interpretation are analyzed from three different angles. First, regarding Zhuangzi’s argument of “the distinction between micro and macro” (小大之辨), Fang Yizhi intends to eliminate this persistent polarized view by emphasizing that micro and macro are indistinguishable. Second, Fang Yizhi uses the conflict between the concepts of “existence” (有) and “nonexistence” (無) to illustrate the relationship between mutual negation and mutual confirmation. He also advocates that if we “are not biased by or do not insist on either existence or nonexistence” and “do not break away from the confronting phenomena of existence and nonexistence”, then we shall be at ease in our real life. Third, Fang Yizhi applies Confucianism, Buddhism, and Taoism to illustrate the approach and structure of Xiaoyaoyou. This is precisely the reflection of his own life experiences. Through the analysis of the present article, one can understand the interpretation methods and theoretical basis Fang Yizhi advocates to remove any polarized view in order to obtain freedom of the soul.