12-year-old Dre Parker (Jaden Smith) and his mother, Sherry (Taraji P. Henson), arrive in Beijing from West Detroit to start a new life. Dre develops a crush on a young violinist, Mei Ying (Wen Wen Han), who reciprocates his attention, but Cheng (Zhenwei Wang), a kung fu prodigy whose family is close to Mei Ying's, attempts to keep them apart by beating Dre, and later harassing and humiliating him in and around school. During a particularly brutal beating by Cheng and his friends, the enigmatic maintenance man of Dre's building, Mr. Han (Jackie Chan), comes to Dre's aid, revealing himself as a kung fu master who adeptly dispatches Dre's tormentors.
After Han mends Dre's injuries using fire cupping, they go to Cheng's teacher, Master Li (Yu Rongguang), to attempt to make peace, but the brutal Li, who teaches his students to show no mercy to their enemies, challenges Dre to a fight with Cheng. When Han declines, Li threatens him, saying that they will not be allowed to leave his school unless either Dre or Han himself fights. Han acquiesces, but insists the fight take place at an upcoming tournament, and that Li's students leave Dre alone until the tournament. The amused Li agrees.
Han begins training Dre, but Dre is frustrated that Han merely has Dre spend hours taking off his jacket, hanging it up, dropping it, and then putting it back on again. After days of this, Dre refuses to continue, until Han demonstrates to him that the repetitive arm movements in question were Han's method of teaching Dre defensive block and strike techniques, which Dre is now able to display instinctively when prompted by Han's mock attacks. Han emphasizes that the movements Dre is learning apply to life in general, and that serenity and maturity, not punches and power, are the true keys to mastering the martial arts. During one lesson in the Wudang Mountains, Dre notices a female kung fu practitioner (Michelle Yeoh, in an uncredited cameo) apparently copying the movements of a cobra before her, but Han informs him that it was the cobra that was imitating the woman, as in a mirror reflection. Dre wants Han to teach him this technique, which includes linking Han's hand and feet to Dre's via bamboo shafts while practicing their forms, but Dre's subsequent attempt to use this reflection technique on his mother is unsuccessful.
As Dre's friendship with Mei Ying continues, she agrees to attend Dre's tournament, as does Dre her upcoming recital. Dre persuades Mei Ying to cut school for a day of fun, but when she is nearly late for her violin recital, which has been rescheduled for that day, she tells him that her parents have deemed him a bad influence, and forbid her from spending any more time with him. Later, when Dre finds Mr. Han despondent, he learns that it is the anniversary of his wife and son's deaths, which occurred years ago when he lost control of his car while arguing with his wife. Dre reminds Han that one of his lessons was in perseverance, and that Han needs to heal from his loss, and tries to help him do so. Han then assists Dre in reading a note, in Chinese, of apology to Mei Ying's father, who, impressed, allows Mei to attend the tournament.
At the tournament, the under-confident Dre is slow to achieve parity with his opponents, but soon begins to beat them, and advances to the semifinals, as does Cheng, who violently finishes off his opponents. Dre eventually comes up against Liang, another of Master Li's students, who is instructed by Master Li to break Dre's leg. When Liang insists that he can beat Dre, Master Li sternly tells him that he doesn't want him beaten, but broken. During the match, Liang delivers a devastating kick to Dre's leg, along with a series of brutal follow-up punches. Although Liang is disqualified for his illegal strikes, Dre is incapacitated, which would allow Cheng to win by default.
Despite Han's insistence that he has earned respect for his performance in the tournament, Dre convinces Han to use his fire cupping technique to mend his leg, in order to see the tournament to the end. Dre returns to the arena, where he confronts Cheng. Dre delivers impressive blows, but Cheng counters with a debilitating strike to Dre's already injured leg. Dre struggles to get up, and adopts the one-legged form he first learned from the woman on the mountain, attempting to use the reflection technique to manipulate Cheng's movements. Cheng charges Dre, but Dre flips, and catches Cheng with a kick to his head, winning the tournament, along with the respect of Cheng and his classmates, both for himself and Mr. Han.