Naraku has gained possession of all the Sacred Jewel shards and reassembles it into it's complete and original form. Upon Naraku's defeat however, he uses his immense strength and power as the Jewel's owner to wish for Kagome's spirit to be trapped within it along with his own, allowing Naraku to survive in eternal conflict with her.
Inuyasha follows Kagome into the Shikon Jewel and finds that Midoriko is still fighting the countless demons and the jewel wants Kagome to take her place and replace the demons with Naraku instead. Kagome realizes that the Sacred Jewel never grants one's true wish; Kikyo wished to be with Inuyasha and Naraku's wish wasn't as evil as he had intended it to be. Then she remembers her grandfather told her that the Shikon Jewel can only be purified by the one soul who wishes to save everything, it's then that Kagome realizes the wish she is to make and Inuyasha joins her side.
With Inuyasha close to her, she wishes for the Shikon Jewel to be gone forever. Midoriko's spirit is freed so that she can pass on to the afterlife and Naraku is finally made content by the warmth that the Shikon Jewel shone as it was destroyed. The cycle of conflict and mayhem is, at last, broken and the Jewel gone forever.
When the Jewel is destroyed, Kagome and Inuyasha are forced back into their own eras and the Bone-Eater's Well becomes sealed for the next three years. In this time, Feudal Japan undergoes some changes: Sango and Miroku are married with three children, twin girls and a newborn son; Kohaku has a new weapon from Totosai and has left the village to continue his family's demon slaying traditions with Kirara; Koga becomes leader of the Wolf Demon tribe and marries Ayame; Shippo frequently leaves the village to train at a kitsune school, so as to develop his fox-magic; and Rin has come to live with Kaede in the village. Inuyasha still returns to the Bone-Eater's Well every three days, although he knows that it will never allow Kagome to return.
Back in present day Japan, Kagome finished high school with her friends. On graduation day, she, again, returns to the Well and looks at the bottom. She blames herself for the Well's unwillingness to allow her to travel to Feudal Japan, believing that, when she finally emerged from the darkness of the jewel, her relief of being home subconsciously sealed the Bone-Eater's Well. Kagome wishes that she could go back and be with Inuyasha and her friends again, closing her eyes and picturing them. Her mother comes into the Bone-Eater's Well Shrine and holds her daughter close as she stares into the empty well, but Kagome can see sky on the other side of the well. Kagome's mother tells her to go but to come visit every once in a while and Kagome leaps in.
In the past, Inuyasha is sitting under a tree with Sango and Miroku's children crawl all over him. Suddenly, he catches a familiar scent on the wind and leave the children to pester Shippo as he rushes to the Bone-Eater's Well. Hesitantly, he peers over the side just as Kagome's hand reaches up and grabs the edge. Inuyasha takes her hand and pulls her up and they stare into each other's eyes. Kagome asks if she has kept Inuyasha waiting again and he takes her into a strong embrace, asking what she's been doing all these years. Shippo, Sango, Miroku and their children come running, pleasantly surprised to see Kagome. She tells them that she's back to stay and they celebrate, telling her everything that has been happening in the past three years that she's been away. Back in modern day Japan, Sota is talking to his friends who ask if they can meet his sister. He tells him that she graduated and she left to get married.
In the village, Kagome and Rin have been studying with Kaede, as they learn to make medicine with herbs they find. Kagome expresses to Inuyasha that she is surprised that Rin didn't stay with Sesshomaru, but Kaede insists that Rin learn and make preparations to return to her home village someday. However, Sesshomaru frequently sends Jaken with gifts for Rin or even delivers them himself and visits with Rin. Just then, Sesshomaru flies overhead with Jaken in tow, the tiny demon vassal calling out to his master that Kagome has returned. Kagome waves and cheerfully calls out to him, calling Sesshomaru "brother" now that her and Inuyasha are married but the demon lord only glares coldly at Kagome and continues on his way, leaving Rin a beautiful new kimono.
As she rides on Inuyasha's back, Kagome thinks to herself about how she is going to live in this era with Inuyasha from now on. Training to properly harness her priestess powers, she dresses in the robes that Kikyo once wore. With Inuyasha by her side, she looks off at the distant mountains.
*This is where we leave Inuyasha, Kagome and the others. The following story is a proper speculation about what happened at the beginning of their implied "happily ever after"*