This article proceeds from the angles of metaphysics, moral philosophy and a philosophy of life in investigating the concept of Dao in the Lao Zi and its connection with the theory of sage-government. (a) Dao as a transcendent and immanent existence can be said to be the basic source of human institutions. (b) A person who invariably obeys the Dao (natural laws) behaves as a moral man. That person then possesses the ideal character and can be considered a sage. (c) The ideal of a political “sage-government” could be considered the highest achievement for a philosophy of life in the Lao Zi. Though this ideal might be considered a form of utopianism, it can serve as an important reflective starting point for leaders in our time.