The film starts with Huo Yuanjia (Jet Li) fighting three Westerners: a British boxer, a Prussian lancer and a Spanish fencer. Huo defeats all the three of them and has a flashback before the next fight with Anno Tnaka (Nakamura Shidō II) from Japan.
Huo watches his father Huo Endi (Collin Chou) teaching students martial arts and wants to participate, but his father was concerned about his ashma 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 match dishonorably by retaliating when Huo Endi showed mercy on the final blow. Huo felt humiliated by his father's defeat and vowed to regain his family's honor and pride. He practiced martial arts secretly behind his father's back. As the years passed, Huo Yuanjia defeated several opponents in Leitai matches and became one of the most famous martial artists in Tianjin. However, as he became increasingly successful and popular, he also became 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 (Master Chin in the US version) injures one of Huo's followers, Huo Yuanjia felt insulted and he 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 sought vengeance on Huo and killed Huo's mother and daughter (Jade in the US version) in revenge. Guided by fury, Huo goes to Qin's house and Qin's godson admits to the murders before committing suicide. 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, greying wanderer, he nearly drowns in a river, but is saved by Granny Sun (Grandma in the US version) and her blind granddaughter, Yueci (Moon in the US version). They bring him back to their village and guided by their simple acts of kindness, Huo begins to learn the value of kindness and mercy.
In 1907, Huo Yuanjia returns to Tianjin and sees the various changes that have taken place in his absence. He apologizes to the family of Master Qin and reconciles with his businessman friend, Nong Jinsun, whom he offended earlier. He challenges the American wrestler, Hercules O'Brien (Nathan Jones), who had 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 in the floor that had come loose during the fight and wins the appreciation of O'Brien, who named Yuanjia the victor. Huo Yuanjia's fame begins to spread with successive challenges with other foreign fighters. In 1909, with funding from Nong Jinsun, he founded Jing Wu Men, a martial arts school in Shanghai.
The members of the foreign Chambers of Commerce fear that Huo Yuanjia's victories might fan anti-foreign sentiments in the Chinese people and thus become a disadvantage to them. They proposed a match between Huo Yuanjia and four foreign champions. Huo Yuanjia took up the challenge although it was an unfair one. Before the matches, Huo Yuanjia met the Japanese champion Tanaka for tea and struck up a friendship with him.
Back to September 14, 1910, Huo Yuanjia faces Tanaka in a titanic battle. In the first round, they fight with their weapons of choice. Huo uses a three section staff and Tanaka uses a katana. The first round was a draw. Before the next round, Huo Yuanjia drinks from a teacup containing poison, which had replaced his original teacup. In the second round involving unarmed combat, Huo Yuanjia 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 Master Qin. Huo could have killed Tanaka with that blow but he refrained from doing so and collapsed. Tanaka declares Huo Yuanjia the victor moments before Huo's death.