Around a thousand years ago, Xu Wenwu (Tony Leung) unearths the mystical ten rings, which bestow upon their bearer immortality and extraordinary powers. The tale recounts that Wenwu might have stumbled upon these rings in either a crater or an ancient tomb. He goes on to establish the Ten Rings organization, wielding his power to conquer kingdoms and overthrow governments throughout history.
Fast forward to 1996, Wenwu embarks on a quest for Ta Lo, a legendary village rumored to host mythical creatures and practitioners of divine martial arts. His journey leads him through a magical, shape-shifting forest, where he encounters the village guardian, Ying Li (Fala Chen). Despite his ring-fueled might, Wenwu cannot defeat Ying Li. Instead, the two men fall deeply in love. When the villagers of Ta Lo reject him, Li chooses to leave with Wenwu. The couple marries and has two children, Shang-Chi (Simu Liu) and Xialing (Meng'er Zhang). During this time, Wenwu decides to abandon his organization and locks away the ten rings, which leads to his loss of immortality and the onset of aging.
Before tragedy strikes, Li gifts Shang-Chi a pendant, a token meant to guide him home if he ever feels lost. Unfortunately, when Shang-Chi is just seven years old, Li is brutally murdered by Wenwu's enemies, the Iron Gang. Enraged, Wenwu reclaims the ten rings and retaliates by decimating the Iron Gang. He subjects Shang-Chi to harsh martial arts training but allows Xialing to train in secrecy. At the age of 14, Wenwu sends Shang-Chi on an assassination mission against the Iron Gang's leader—Li’s murderer. Traumatized and guilt-ridden, Shang-Chi flees to San Francisco, adopting the name "Shaun."
In the present day, Shang-Chi leads a seemingly normal life as a parking valet alongside his close friend Katy (Awkwafina), who remains unaware of his tumultuous past. Their days are filled with mundane activities until their lives take a dangerous turn. While on a bus, they are ambushed by the Ten Rings—led by the formidable Razor Fist (Florian Munteanu), who wields a machete for a hand. During the chaos, Razor Fist learns about Shang-Chi's sister, prompting him to pursue her next.
Determined to protect his sister, Shang-Chi reveals his dark past to Katy, who insists on joining him as he travels to find Xialing. They eventually locate her at an underground fight club in Macau, a place she built after escaping their father at the age of sixteen. Here, they also meet Jon Jon (Ronny Chieng), Xialing's right-hand man. Tensions arise as Xialing expresses her anger towards Shang-Chi for abandoning her with their father. Soon after, the Ten Rings invade the fight club, and Wenwu captures them along with Xialing and her pendant.
They are taken to the Ten Rings' compound, where Wenwu seeks to unveil a mystical map to Ta Lo using the pendants. He reveals his belief that Li is still alive and being held captive behind a sealed gate in Ta Lo. Wenwu insists that the elders are punishing Li for defying their orders when she chose to be with him. When his children and Katy refuse to support his misguided mission, he locks them away.
However, the trio meets former actor Trevor Slattery (Ben Kingsley), imprisoned for pretending to be Wenwu, and his magical companion, Morris—a creature captured by Li. With Morris as their guide, they manage to escape and arrive at the mystical Ta Lo, a dimension filled with various Chinese mythological creatures. There, they are welcomed by Guang Bo (Wah Yuen), one of Ta Lo's leaders, and Ying Nan (Michelle Yeoh), Li's sister. Ying Nan shares a chilling history: Four millennia prior, a dark force known as the Dweller-in-Darkness sought to consume their universe but was thwarted by the Great Protector, a dragon that sealed the dark portal.
Ying Nan reveals that the Dweller-in-Darkness has been impersonating Li, manipulating Wenwu into using the ten rings to open the gate to unleash chaos. To prepare for Wenwu’s assault, Shang-Chi, Xialing, and Katy join the villagers in honing their martial skills and crafting weapons from dragon scales. Katy receives archery training while Xialing brandishes a dragon-scale knife. As the battle draws near, Shang-Chi trains with Nan, honing his combat prowess.
The climactic battle ensues when Wenwu and the Ten Rings attack Ta Lo. Despite his initial dominance, Wenwu finds himself overpowered by Shang-Chi and, in a moment of desperation, attempts to breach the gate, unleashing the Dweller's minions. In a turning of fate, the villagers and Ten Rings unite against this newly awakened threat. The Great Protector revives Shang-Chi, empowering him to combat the sinister forces. After a fierce clash, Wenwu sacrifices himself, passing the ten rings to Shang-Chi before succumbing to the Dweller-in-Darkness.
In the aftermath, Shang-Chi, Xialing, Katy, and the Great Protector team up against the Dweller-in-Darkness, finally defeating it together. With peace restored, Shang-Chi and Katy return to San Francisco, where they are soon summoned by sorcerer Wong (Benedict Wong) to Kamar-Taj.
In a mid-credits scene, Wong introduces them to Bruce Banner and Carol Danvers, as they delve into the origins of the rings, noting they act as a beacon. The post-credits scene unveils Xialing stepping up as the new leader of the Ten Rings, charting a new course by training both women and men, despite having told Shang-Chi she would dissolve the organization.
