It refers to a person of consummate virtue. Sages were regarded by the ancient Chinese as having the highest level of character and integrity. They knew the way of heaven and the hearts of people, and could thus make rules and regulate human ethics. With their exemplary statements and behavior, they were paragons of virtue. But scholars have different interpretations as to what sagely virtues mean. According to Confucian scholars, sages are those who practice virtues such as benevolence and righteousness in a perfect way and foster moral virtues in others. In the Daoist view, however, sages should adopt a "non-action" approach to life, accept people for what they are, and let them do as they please.

Mencius said, "Just as compass and ruler are instruments for squares and circles, sages are models for ethical behavior." (Mencius)

Therefore, sages deal with the world's affairs by way of non-action, teach people without uttering a word, and let things develop without intervention. Sages produce and grow things but do not take ownership of them, nurture things but do not claim credit for them, and accomplish things but do not brag about them. It is precisely because they seek no recognition for accomplishments made that they are never forgotten. (Laozi)