The film starts with Huo Yuanjia fighting three Westerners: a British boxer, a Belgian lancer, and a Spanish fencer. Huo defeats all three of them and has a flashback before the next fight with a Japanese fighter called Anno Tanaka.
Huo Yuanjia watches his father Huo Endi teaching students martial arts and wants to participate, but his father is concerned about his asthma and refuses to allow him to practice martial arts. Huo Yuanjia then sees his father in a leitai match with another martial artist named Zhao, who won the fight dishonourably by retaliating when Huo Endi was distracted by seeing his son at the match. Huo Yuanjia feels humiliated by his father's defeat and vows to regain his family's honour and pride. He practices martial arts secretly behind his father's back. As the years pass, Huo Yuanjia defeats several opponents in leitai matches and becomes one of the most famous martial artists in Tianjin. However, as he becomes increasingly successful and popular, he also becomes more arrogant and ruthless towards his opponents. His late father, however, advocated the practice of showing mercy and not doing any serious physical harm to opponents.
When a rival martial arts master named Qin Lei injures one of his followers, Huo feels insulted and confronts Qin at the latter's birthday party. The confrontation escalates into a fight between Huo and Qin, in which Huo emerges as the victor by killing Qin with a fatal blow to the chest. However, Qin's godson seeks vengeance on Huo and kills Huo's mother and daughter in revenge. Guided by fury, Huo goes to Qin's house and Qin's godson admits to the murders before killing himself. Later, Huo learns that it was his follower who had provoked Qin earlier, which resulted in his beating from Qin.
Overwhelmed with grief and shame, Huo flees Tianjin and wanders aimlessly for many miles. A disheveled, graying wanderer, he nearly drowns in a river, but is saved by Granny Sun and her blind granddaughter Yueci. They bring him back to their village and Huo, guided by their simple acts of kindness, begins to learn the value of kindness and mercy.
In 1907, Huo returns to Tianjin and sees the changes that have taken place in his absence. He apologizes to the family of Qin and reconciles with his childhood best friend, the businessman Nong Jinsun, whom he offended earlier. He challenges the American wrestler, Hercules O'Brien, who has been making headlines by defeating Chinese martial artists and calling the Chinese "weak men of the East", and defeats O'Brien. He saves O'Brien from being impaled by some nails on the side of the ring which have become exposed during the fight and he wins the appreciation of O'Brien, who names Huo the victor. Huo's fame begins to spread with successive challenges with other foreign fighters. In 1909, with funding from Nong Jinsun, he founds Chin Woo Athletic Association in Shanghai.
The members of the foreign chamber of commerce fear that Huo's victories might fan anti-foreign sentiments among the Chinese people and thus become a disadvantage to them. They propose a match between Huo and four foreign champions. Huo takes up the challenge, even though it is an unfair one. Before the matches, Huo meets the Japanese champion Tanaka for tea and strikes up a friendship with him.
Back to 14 September 1910, Huo faces Tanaka in a titanic battle. In the first round, they fight with their weapons of choice. Huo uses a three-section staff while Tanaka uses a katana. The first round is a draw. Before the next round, Huo drinks from a teacup containing poison, which had replaced his original teacup. In the second round involving unarmed combat, Huo suddenly has difficulty in breathing and loses his strength. He collapses and starts coughing blood, dying from arsenic poisoning. Tanaka and Huo's supporters immediately demand that the match be halted and postponed, but Huo replies that he wants it to continue since he is going to die soon. Huo is dominated by Tanaka but he manages to deliver a blow to Tanaka's chest, similar to the one he used on Qin. Huo could have killed Tanaka with that blow but he refrained from doing so and collapsed. Tanaka declares Huo the victor moments before Huo's death. The final scene shows Huo's spirit practicing Wushu on the field as Yueci observes him with a tearful smile before he joined his wife and child in spirit.