In a key example of situational irony in the story, the Fisherman’s own soul corrupts him. This is ironic because, as Wilde knew, most people associate the human soul with purity and goodness. Even when a person behaves cruelly, it is assumed that their “soul” is still pure. Wilde challenges this idea by having the Soul ironically act as the force of evil in the story.
The irony comes across in the following passage, in which the Fisherman expresses confusion at who the Soul has become in the three years that they were apart:
And after that they had gone a league from the city the young Fisherman grew wroth, and said to his Soul, “Why didst thou tell me to smite the child, for it was an evil thing to do?”
Here, the Fisherman asks the Soul why—amongst other cruel acts—he persuaded him to harm a child. It doesn’t make sense to him, as smiting a child is “an evil thing to do,” implying that the Fisherman believes it's impossible for a soul to want to hurt others or perpetuate cruelty.
While situational irony can often be humorous in literature, this example is quite tragic. When the Fisherman finally realizes that the Soul himself has become corrupted in their time apart, he “fell upon the ground weeping bitterly.” With this ironic twist, Wilde is communicating that, when separated from their hearts (or ability to love), human souls can easily be corrupted.