Gyun faces a critical moment in his life when his father suffers a serious injury due to a construction accident, resulting in a coma. This incident marks the beginning of a significant journey for Gyun, who, following his father's awakening at the end of the first film, finds himself in Shanghai, striving to earn money to cover his father's medical expenses by working in a construction company.
As Gyun settles into his new role, his friends, Mao and Gou, present him with an exciting but risky opportunity: to perform a lion dance opening act for an exhibition hosted by Quizhen Martial Art School. This event, however, turns chaotic when a Muy Thai fighter gets stuck in traffic, prompting the school to choose Gyun as a last-minute replacement. Unfortunately, Gyun's debut is cut short when he is swiftly beaten by Master Zhang. The situation worsens as Xiao Zhangyang, the star fighter from Jinxin Fighting Club, storms in and easily defeats Zhang in front of a large audience, leading to humiliation for the school and a withdrawal of financial backing from their main investor.
After this public debacle, Zhang's adopted daughter, Xiaoyu, expresses her remorse to Gyun and his friends for their unpaid performance and provides her contact details for future opportunities once funds become available. Gyun finds himself in a precarious situation when he gets fired from his job under dubious theft accusations and is subsequently evicted for allowing his friends to stay in his small apartment. With nowhere else to turn, Gyun visits Quizhen School in hopes of collecting the money owed to them and discovers that Xiaoyu is facing harassment from Jinxin's students over an alleged injury. Demonstrating his martial arts skills, Gyun defends Xiaoyu, which prompts her to propose that he join the Shanghai Fight Night tournament, giving him a chance to win the prize money needed for the school.
Initially hesitant, Master Zhang sees no other choice when they face a foreclosure notification and the threat of Jinxin's takeover. The three friends help Zhang and Xiaoyu relocate their school into Gyun's apartment, leading to a challenging yet intimate living arrangement. Without enough space to train, Zhang starts working with Gyun in an overgrown, abandoned martial arts school, supplementing their needs by running a food stand. As Gyun enters the tournament, he first battles Silva, a Brazilian fighter trained in taekwondo and capoeira. Although Silva starts the match in a dominant position, Gyun surprises everyone by utilizing his lion dance training and lands a critical blow that incapacitates his opponent, leading to a stunning knockout victory.
Master Zhang introspects on the downfall of Quizhen School and Jinxin's rise, highlighting the latter's misuse of modernized martial arts, which has tarnished traditional kung fu's reputation. Amid fiscal strains, Xiaoyu returns from her studies abroad to assist in stabilizing the school's finances. As Gyun's reputation begins to rise alongside his success in matches, Zhang concentrates all his efforts on Gyun's development while Mao and Gou manage the food stall. Despite encountering various unhelpful former masters who refuse to train them, Xiaoyu eventually secures a secretive investor who turns out to be Jin Muyang, associated with Jinxin Fighting Club and looking to buy out Quizhen School.
After rejecting the enticing but conditional offer from Jin, which included changing the school's name, Gyun and Xiaoyu bond over a personal outing to a theme park, where they share a moment of aspiration. As Gyun progresses to the semi-finals, he faces various obstacles but ultimately defeats Yasang, crafty maneuvering his way to secure victory despite the challenges from the corrupt timekeeper and his opponent's strength.
Triumphant but facing severe backlash, the Quizhen School is soon expelled from their makeshift location due to Jin's manipulations. With their reputation at stake, Gyun must confront slander, as distorted footage frames him as an aggressor, ruining any chances they had for support. As Gyun and his friends struggle to find work amidst these challenges, Xiaoyu offers her savings to assist with Gyun's father's medical treatment before preparing to return to college in the U.S. This development pushes Gyun towards considering returning home.
However, a chance encounter with a journalist leads to the uncovering of a shocking truth about Zhangyang and his unfair advantages during matches, revealing that he has been cheating by using plaster powder in his hand wraps. Gaining motivation from this discovery, Gyun rallies his friends to confront Zhangyang during an upcoming public exhibition match. The fight culminates in a dramatic revelation of Zhangyang's cheating, as Gyun cleverly disarms him, leading to a crowd uproar.
In a thrilling conclusion, Gyun emerges victorious, gaining the admiration of an original investor associated with Jinxin, resulting in Quizhen School finally reclaiming their original building. Gyun's hard-fought journey allows him not only to make amends on behalf of his school's honour but also to secure the funds necessary for his father's recovery, marking a transformative chapter in Gyun's life as he and his friends prepare for their next adventure.
