Junbao and Tienbo grow up together in a Shaolin Temple as monks, studying the martial arts and generally getting into trouble. They are both expelled from the temple after Tienbo almost kills a fellow student who cheats in a fight against him. Aided in their escape by their sympathetic teacher, they receive final instructions regarding the potential paths of their different personalities, with a specific warning given to Tienbo. They both then go into the outside world to find their way in life. Meanwhile, a gang of henchmen are forcibly taking money from a local shop owner. A woman named Miss Li steals the money and returns it. Having noticed the money gone, the henchmen start to fight with Miss Li. Miss Li holds her own during the fight, but soon gets into a bit of trouble due to her being outnumbered. Junbao comes to her aid and defeats the gang. Army reinforcements arrive to break up the fight and so the trio run away to escape capture. At this moment the eunuch governor travels through the town, roughing up the locals as he does so. Tienbo realizes that he wants to be as rich and powerful as the governor, but Miss Li warns him that he has "a heart of a viper" and wonders if he could handle this power. Miss Li then shows them to a pub to get food.
Inside the pub, they find a woman named Siu Lin. Siu Lin is searching for her lost husband, during which she supports herself by playing on a sanxian that said husband gave to her as a gift. She finds him inside the pub as the new husband of the governor's niece. The niece starts a battle with Sui Lin where they both seem equal, but the husband hits Siu Lin on her head with a stool causing her to collapse. Junbao helps Siu Lin by defending her against her ex-husband and the niece's guards.
The next day, while Junbao and Tienbo are making money with their amazing kung fu skills, the governor's second in command spots them and is impressed with Tienbo's abilities (and his eagerness to kow-tow to authority.) He offers him to join the army (which he readily accepts) however, Junbao is more reluctant to do so and declines going with Tienbo and so the two go their separate ways. Later, some soldiers come to the pub to collect taxes (which have increased due to the governor’s greedy nature) but Junbao and the rebels (who have stolen great valuables from the governor to give back to the poor) fight and kills them one by one. One soldier escapes alive and starts off towards the army's camp to warn them about the rebels with Junbao in pursuit. Just in front of the army encampment, Tienbo kills the soldier before he warns the rest of the army about the rebels whereabouts. Tienbo warns Junbao to stay clear of the rebels as they'll get him into trouble. Now knowing where the rebels are hiding however, Tienbo takes this unique opportunity to gain a promotion. He sets a trap for Junbao and the rebels by telling them that the army is on patrol and when would be the best time to attack them.
Junbao and Siu Lin collect all the rebels from the region, and go to the army camp (thus, falling for Tienbo's trap). A big battle occurs where most of the rebels die. Tienbo captures Miss Li and Siu Lin. In the end, the only survivors are Junbao and a few rebels.
Because of the trap, the governor promotes Tienbo to lieutenant. With his new authority (and some poignant advice from the governor) Tienbo kills Miss Li, and holds Siu Lin as bait so that he can try to convert Junbao to the army's cause. This is unsuccessful and Junbao rescues her. Due to the fact that his best friend betrayed him, Junbao's mind snaps and he goes crazy for days. While recuperating in the countryside with Siu Lin, he has a sudden epiphany that leads to him regaining his mental health and inspiration for the creation of the martial art of Tai Chi Chuan.
While the governor is traveling to Beijing to see the emperor with his sister, they encounter Junbao and Siu Lin who kill the soldiers guarding them and also kills the niece. With the governor captured as a hostage, they go to the army camp and demand Tienbo to surrender his wealth and his power. Due to his arrogance, Tienbo declines and starts to fight Junbao thinking that he is still the inferior fighter. To Tienbo's surprise, however, Junbao is now fighting using the heretofore unseen style of Tai Chi Chuan. Because the style relies less on size, power, speed and strength, Junbao is able to fend off Tienbo with ease. Seeking an additional advantage in their fight, Tienbo kills the governor in order to gain complete control over the troops surrounding them. Siu Lin intervenes and convinces them not to listen to Tienbo as he just betrayed their leader. Seeing this (and also the way Tienbo utilizes his troops as battle fodder), the troops back off and leave Tienbo's fate to Junbao. After a stunning series of parries and blows by Junbao, Tienbo is defeated and ultimately killed due to his reluctance to accept fate and admit defeat.
After the fight Siu Lin and Junbao go their separate ways with Junbao returning to the Shaolin temple and establishing his own school to teach Tai Chi Chuan.
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