Abstract: The Huayan School's "Yuanrong (perfect integration) of the mundane and the sacred" (真俗圆融) thought on Buddha-nature and liberation developed through a process of multilayered over-interpretation of the Avatamsaka Sūtra's teachings, particularly its claims of "non-duality of living beings and Buddha" (生佛不二) and "equality of mind and Buddha-nature" (心佛平等).By virtue of its unique hermeneutic strategy, the Huayan Buddhism has undergone a double transformation: (a) from "voidness of both consciousness and object" (心境皆空) to a philosophy of absolute, eternal consciousness (真常唯心), thus eventually assimilated with the Vedanta tradition; (b) from "non-duality of paramartha and samvrti" (真俗不二) to "mutual-fusion of the mundane and the sacred" (真俗互融), thus ultimately dissolved Buddhism's transcendent aspirations and integrated into the naturistic and harmonious Chinese wisdom of life.The above-mentioned development of Huayan Buddhism epitomizes Mahāyāna Buddhism's syncretic fusion with both Vedāntic metaphysics and Chinese naturalism.It also demonstrated a de facto interweaving of Hindu and Chinese culture.