The movie opens with Yang Tieh caring for his elderly teacher. The teacher is very ill and the treatments Yang Tieh administers are ceasing to be effective. Teacher believes that his time is up, and he is dying. He tells Yang Tieh that there is no longer time to put off what he needs Yang Tieh to do. He has been instructing Yang in the "Poison Clan" Kung-Fu technique, but he is dying now. He tells Yang that he had other pupils besides Yang, and is deeply concerned about what they are doing. Poison Clan kung-fu can be used to harm and oppress people, for many evil puposes. Many clan members have done so, earning the clan its bad reputation. Teacher tells Yang that he must tell him more about the previous pupils.
Yang and Teacher descend into a dungeon-like area under the main room. Various training tools and structures, all old and delapidated, sit here, each with a large emblem of a different poisonous beast on the wall nearby. Teacher says he had five previous pupils. Number 1 studied the Centipede style, known for its exceptional speed of movement (he is shown rapidly smashing small plates dropping from the ceiling, most before they hit the floor). Number 2 studied the Snake style, known also for speed, and for its agility (Snake is shown smashing ceramic pots and moving limbo-style under a rack, smashing rungs out from underneath it). Number 3 studied the Scorpion style, based on the hands moving like scorpion pincers, and powerful kicking techniques (Scorpion is shown practicing these kicks and smashing wooden targets on high poles). Number 4 studied the Lizard style, which is agile and nimble and enables a man to climb like a lizard (he is shown running up walls and snuffing out candles). Number 5 studied the Toad style, which is based on power and resilience, and is near-invincible against physical harm (Toad is shown lying on a bed of spikes, pushing wooden spikes with his bare chest, and using forearm smashes to bend sheets of solid metal).
Teacher explains that the pupils always wore masks while training, and changed their names after finishing. Moreover, they did not all train together-- Number 1 and 2 studied with him at the same time, and knew each other. Number 3 studied alone afterward, and never met any of the others. Numbers 4 and 5 studied together after Number 3 left, and knew each other, but never met the first three. Number 4, Lizard, was the oldest of the pupils. They will all use their skills only in times of dire need, making it even harder to find and identify them.
Yang has studied the basics of all five styles but has not specialized in any of them, and thus his skills aren't enough to defeat the five pupils on his own. Teacher tells him that only be allying with at least one pupil who is not using his skills for bad purposes, can he hope to defeat any of the others who are. He makes Yang promise to locate the five pupils, and make sure they are not using their skills for evil. Any who are, must be faced.
Teacher has one lead for Yang. He had a colleague who used to be a fellow Poison Clan teacher. He is living quietly in a nearby town under an assumed name. He has a lot of money made from Poison Clan activities. Teacher wants Yang to find this colleague and convince him to donate the money to a charity. The five pupils know about this money and may try to gain it for themselves. The colleague, although skilled in kung-fu, would not be a match for them.
Yang makes his way to a small town, keeping his eyes and ears open. He notes that a police officer, He Yuan-Xin (though the surname is clearly dubbed 'Ho' in the English-language DVD), is very well-liked among the townspeople. He watches Officer Ho on patrol with his captain, Ma Chow, who seems polite and reasonably friendly but more businesslike than Ho.
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Captain Ma is heading home in the evening when he passes by the workplace of an elderly scribe, Mr. Yuen. Yuen is clearly a well-liked and respected man throughout much of the town. Ma checks in on him and makes sure he is all right. Yuen is working a bit late that night but plans to head home soon.
On arriving home, Yuen finds his entire family being held captive by two mysterious men who turn out to be Snake and Centipede. They are sure that Mr. Yuen is the fellow Poison Clan teacher who has the Clan's fortune. Snake and Centipede become a bit too overzealous in their interrogation of Mr. Yuen and beat him to death. Frustrated and intending to leave no witnesses, they slaughter Yuen's entire family, including the women and children, and leave empty-handed. As they are leaving, a town gambler and drunk named Won Fa spots Snake and Centipede. He barely manages to hide before they see him, paralyzed with fear.
Some time later, Scorpion stealthily arrives at the Yuen's home. We do not see Scorpion's face as he is wearing his school training mask. He looks over the slain family and notices that Yuen is clasping a single candle in his hands. Taking the candle, he breaks it in half and finds a small piece of parchment inside, which he secretes into his clothing before leaving.
When the bodies are discovered, the police begin investigation. The local judge is under pressure to have the case solved and closed promptly due to Mr. Yuen's highly respected position in the town. He puts the police under deadline after which they will all be whipped each additional day it takes. Ho has a couple of ideas and asks for some leave for official purposes.
Officer Ho is discussing the case with his friend. They believe one of the Clan members may be responsible. Ho is now certain that Mr. Yuen was the Clan teacher who had the Clan fortune, and he was killed for the money. Suddenly Ho hears a slight noise outside the room where he and his friend are talking. He pulls open a casement, causing Yang to stumble in. Yang reveals that he has learned that Won Fa saw the Yuen family's killer.
Cut to Won Fa being hauled into the police station. A kettle of hot tea is poured over his face to intimidate him. But then Officer Ho offers him a piece of silver in return for what he saw at the Yuen family's house. Instantly much more talkative, Won Fa says he saw a heavily bearded man come out of Yuen's house. Ho and several of the police know the man as a good friend of Qi Dong (dubbed Mr. Hung in the English language DVD), a wealthy aristocrat who is well-connected with local government officials.
Ho is again speaking with his friend, who says he's also seen the bearded man. They are wondering if he is the Centipede, Snake, or Scorpion. Ho tells his friend that he needs to assist the police with the man's capture. When Ho speaks to the police about the plan, Ma is skeptical. Ho assures his fellow officers that his friend is a first-class kung-fu expert.
Ho goes to visit. Mr. Hung the next day, dropping a subtle hint suggesting that Hung is involved somehow with the Poison Clan. Hung's face clearly changes but he pretends not to understand.
Meanwhile, Ma and the police are waiting for Hung's bearded friend, Zhang Yiao-Tian (his name is dubbed just as Tian in the English-language DVD). Yang Tieh is hiding nearby to watch. The police surround Tian but cannot capture him. Finally Officer Ho's friend steps out of a door and identifies himself as Liang Shen (though the English language DVD clearly gives a dubbing of 'Li Ho.'), and accuses Tian of the Yuen family's murder. Tian leaps at Li, swinging a sword he'd seized from one of the police officers. Li doesn't budge, and the sword bounces off his naked arm, revealing him as Clan member number 5-- the Toad. Tian must use his Centipede skills to fight Li, revealing his own identity to Li and the police. Centipede and Toad battle in a well-choreographed kung-fu scene. Toad defeats Centipede, grappling him so the police can place him in chains and shackles. Ma asks Li to come to court but Li says it's not necessary.
Yang walks off, having learned that the Toad and Centipede are in the town, but he doesn't yet know of any of the others.
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Li is placed in the Iron Maiden. Just as it is closed, he regains consciousness and busts out of the device, his body unmarked and unharmed. He chastises the police for their contraption, understanding what it is for, and saying he doesn't have a weak spot. The police cannot contain Li. Then Hung emerges from behind a curtain and engages Li in combat, using his Snake technique. Li notes the snake design on Hung's wristlets and understands who he is, and that he's behind the plot to frame Li. Snake and Toad battle in another kung-fu scene. Snake uses his skills to probe the Toad's body trying to find the weak spot. Toad is starting to get the better of the battle when suddenly two metal darts hit him from behind, sticking behind his ears. The darts are shaped like scorpions. Toad understands that the Scorpion is somewhere in the courtroom, but he cannot determine where. Snake begins to laugh and hits Toad hard in the same spots, behind his ears. Li's Toad-style kung-fu is broken and he is now helpless. The police put him in the Iron Maiden again and the judge demands he confess. Li simply passes out and falls unconscious. When he is removed from the Iron Maiden, his body is covered with puncture wounds.
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Officer Ho returns to town. Ma finds him at police headquarters, brooding and angry. He's learned that Tian was acquitted of the Yuen family's murder, and Li was convicted. He interrogates Ma about the turn of events, and Ma merely says that the case is now closed, and Li's crimes confirmed. Ho wants to see Li, but Ma says Li killed himself.
Ho storms off to the tavern and orders all the patrons to leave. He begins to drink heavily when some of his fellow officers approach him, showing him the money they were given by Mr. Hung. They explain that Li was suffocated by an officer named Ling Xuong, after his kung-fu was broken by a device called the Iron Maiden (Ho's face changes to show he's heard of the device and understands why it was used). They also reveal how Won Fa and Officer Ling were eliminated as witnesses and collateral damage-- Won Fa was killed with a hook that was shoved down his throat, and Officer Ling was killed with a long, sharp needle that punctured his brain. Ho gives them back the bribe money so they can escape town quietly in the evening.
He begins to drink again, when he spots Yang Tieh watching him. Yang simply smiles and reveals Officer Ho as Clan member number 4, the Lizard. He gives Officer Ho a Poison Clan password to show he's with the Clan. They go off to find privacy to talk.
Yang explains how he figured out that Officer Ho was the Lizard. He also reveals that while drinking and gambling with various officers in the police force, he learned that Toad's kung-fu wasn't broken by the Iron Maiden, but by the Scorpion. They both know that Yuen was the second Poison Clan teacher, and was murdered for the Clan's fortune. It wasn't removed from his home, so Yuen must have had a map showing where the fortune is hidden.
Officer Ho brings Yang to a secret area in town where he trains and keeps his Lizard-style technique sharp. Having training in all five main styles of the Poison clan, Yang shares his knowledge of the Centipede, Snake, and Scorpion styles, devising strategies for himself and Officer Ho to fight against them. They practice and hone these strategies well into the night. Since he is combining with the Lizard, Yang's battle strategy will involve using his own Lizard skills.
The next day they are headed to Mr. Hung's mansion to confront and kill him and Tian. They find Captain Ma waiting for them on the way. Ma wants to help out. He understands what they want to do and believes that Hung and Tian will be tough to beat. Because of his friendship with Ma, Officer Ho agrees. As they start out again, Officer Ho notes that Ma is not wearing his police uniform. Ma states he's resigned from the force. Officer Ho decides that he will quit as well, pulling off his uniform hat and shirt and dropping them in the street.
As they arrive, Hung looks closely at Ma and states, "I wasn't expecting three." Officer Ho calls Tian out and states his knowledge that Tian is the Centipede and Hung is the Snake. Lizard and Yang begin the big kung-fu battle with Centipede and Snake; the battle raging throughout the mansion and revealing Officer Ho's identity as the Lizard to Hung, Tian and Ma (we see Ma looking intently at Ho for a moment). During the battle, Tian is hurt and Lizard and Yang are able to team up against Snake. Frustrated and clearly on the losing end, Hung demands to know why Ma is just standing by and watching, saying he knows who Ma is.
Understanding that his cover is blown, Ma suddenly lunges into the fight with a kung-fu kick that reveals himself as Clan member number 3, the Scorpion. In the sudden confusion, Hung turns and tries to run away, but Ma opens two hidden compartments on his belt where he stores his scorpion-shaped darts and hurls a handful of them into Hung's back. He demands to know how long Hung has known about him. Hung answers that he spotted Ma throwing the darts that broke Toad's kung-fu in the court battle. In answer, Ma throws another handful of darts that hit Hung in the chest and stomach. Officer Ho is aghast, admitting he was completely fooled. He understands that Ma, as the Scorpion, was seeking the Clan fortune for himself, and looking to kill all his fellow Clan members so they couldn't pursue him for it. His demeanor completely changed in an instant, Ma admits to all of this and that he has Mr. Yuen's Clan fortune.
Yang and Lizard engage Scorpion in battle. Holding them off but knowing he can't take them both by himself, Scorpion calls to a recovered Centipede to assist him. When an appeal to logic (that Yang was sent by Teacher to hunt them down and will kill them both if given a chance) fails, Scorpion bribes him with half the money. That gets Centipede's attention and he rejoins the fight. Splitting Scorpion and Centpide up, Llzard and Yang fight to the best of their ability.
Meanwhile, Snake is pulling the scorpion darts out of his chest and stomach and pulls himself to his feet, coming up behind Scorpion, who is starting to get the better of his battle against Yang. Snake strikes from behind, bursting Scorpion's stomach and abdomen. Scorpion instantly kills Snake with a high kick over his shoulder that smashes into Snake's forehead. But the damage to Scorpion is done. Lizard and Yang climb a wall, fending Scorpion off and allowing him to exert himself to where he dies of his wounds and blood loss.
Centipede scrambles to try and find a clue to the Yuen fortune on Scorpion's body, but Lizard and Yang are waiting. Putting their strategy against the Centipede style into use, they finish Tian off and kill him.
The battle over, Lizard pats Scorpion's body down and finds the map showing where Yuen hid the Poison Clan fortune. A disgusted Yang says they should kill the corrupt judge as well, but Lizard says that if they do this, the next one could be worse, and that the killing must stop some time. The best course of action is to use the map to find the money and use it well as their Teacher wanted, to pay the Clan's debts. The movie closes with Lizard and Yang leaving the mansion and the bodies of Centipede, Snake and Scorpion inside, to carry out Teacher's wishes.