Film debut of Thomas Ian Griffith, who portrays a Vietnam veteran; in real life, Griffith was only 13 years old when the Vietnam War ended. He is also some months younger than Ralph Macchio who plays a child.
Ralph Macchio's character was suppose to have a romantic relationship with the character of Jessica played by Robyn Lively but he asked to have their relationship be platonic because he didn't want his wife to be jealous.
After answering an open casting call for The Karate Kid Part III, Sean Kanan was called back for a screen test with Ralph Macchio. "I wanted them to remember me," said Kanan. "So I backed Macchio into a corner and wouldn't let up."
This movie was part of a wave in the late 80's/early 90's to introduce wide screen letterbox movies to the general public. The first printing of the VHS are all in letterbox. (re-prints from 1994 claim to be in wide screen but are pan & scan). (Ghostbusters II (1989) was another big title movie released in letterbox only in the first printing, many video stores got complaints about these titles because customer's thought that there was half of the picture missing, many video store owners called RCA/Columbia to find out if there was a printing problem to only be told that they were meant to be this way.)
The only one of the original team not to return for this second sequel was cinematographer James Crabe who was severely ill with AIDS at the time of production. His role was taken over by Steve Yaconelli. Crabe succumbed to his illness a month before the film was released.
While filming, Sean Kanan performed his own stunts, including one wherein he lunged forward and landed on his stomach for 20 takes. After taking aspirin for four days to deal with the residual pain, Kanan fell unconscious. At a hospital, he was diagnosed with internal bleeding caused by a torn abdominal wall.
Jonathan Avildsen, son of the film's director John G. Avildsen, screen tested for the part of Mike Barnes. He did such a fine job that the role of "Snake" Silver, Terry's son, was created especially for him.
The trivia item below may give away important plot points.
The final All-Valley Tournament results can be seen at the beginning of the tournament. "Sladkus" lost to "Dempsey" in the semifinals, while Barnes defeated "Orshan" in the same round. Barnes then defeated "Dempsey" to become a Finalist. As Defending Champion Larusso fights Barnes. Since he wins, Larusso is named Grand Champion.