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It was in the Ming Dynasty that most of the commentaries on the Laozi were written in China. Among these commentators, there were many Neo-Confucian scholars. Several Neo-Confucian commentators tried to comment favorably on the Laozi, breaking from the view that Laozi was heresy. Xue Hui(薛蕙) was the first commentator in the Ming Dynasty that interpreted the Laozi from a Confucian viewpoint, and his Variorum Laozi (老子集解) became an exemplary commentary to subsequent Neo-Confucians who tried to embrace positively Laozi’s thought. This paper studies the way that Xue Hui connected Laozi’s thought with ‘the learning of human nature and mandate’(性命之學) of Neo-Confucianism. The Song Neo-Confucians sought to ‘return to human nature’(復性). Xue Hui argued that Laozi had the same purpose. According to him, Laozi’s Dao is identifiable as the principle of human nature that is rooted in cosmological substance. However, most Neo-Confucians, including Chu Hsi, criticised Laozi for neglecting the aspect of ‘being’ of Dao and the activity of mind. To refute such criticism, Xue Hui explained ‘non-being’(無) as the substance(體) of Dao and ‘being’(有) as the function(用) of it,and regarded the two aspects as inseparable. His theory of substance and function is based on Cheng Yi’s idea that “substance and functions come from the same source, and there is no gap between the manifest and the hidden.” Even though the two aspects of Dao are inseparable, Xue Hui stressed the importance of non-being and substance, and thus demanded the self-cultivation of ‘emptiness and tranquility’(虛靜). Furthermore, he thought that the relation between Laozi’s Dao and Confucian moral norms was that of substantial quality(質) and ornamental accomplishments(文),but Laozi emphasized the importance of the former to prevent the latter from destroying it. He insisted that Laozi’s thought should not be misunderstood as lacking ethical concerns.