Transknowletology, an emerging field that bridges translation practice and knowledge transfer on the basis of the constructiveness of translation and mobility of knowledge, examines how local knowledge disseminates globally through translation and contributes to the construction of the world knowledge. Literary translation has a socialized function of knowledge transfer, facilitated by the aesthetic value of literary works. Similarly, legal literature translation involves the exchange of different countries’ original legal knowledge across languages, cultures and legal systems. Drawing upon the Law and Literature Movement and its “law in literature” approach, this paper clarifies legal literature’s nature and the translator’s role as the knowledge communicator, and explores the legal knowledge transfer in literary translation with Shapiro’s translation of Shuihu Zhuan as a case. It is shown that thanks to the knowledge accumulation concerning traditional Chinese law and culture, Shapiro not only shows the awareness of Lige (Standardization), expounding on the legal knowledge and cultural connotations in the source text, but employs the strategy called Chuanyi (Communication), omitting obsolete or negative legal information to reconstruct the image of traditional Chinese law. Shapiro’s translation of Chinese legal literature is conducive to redefining the contemporary value of traditional Chinese legal knowledge and rule-of-law scenarios, laying the foundation for telling the story about China’s rule of law and reshaping the image of China under the rule of law.