English Title: Fist of Legend 
Country: Hong Kong
Part 2 End
Chen Zhen (Jet Li) is attending class in Kyoto University when some Japanese karate students from the Black Dragon Clan burst in and attempt to force him out because he is Chinese. Mitsuko Yamada (Shinobu Nakayama), one of Chen's female classmates who has a crush on him, along with Chen's professor and other students, speak up for him. The thugs turn violent but Chen easily defeats them using a variety of controlled Chin Na techniques. The Japanese thugs' sensei, Funakochi Fumio (Yasuaki Kurata), who is also Mitsuko's uncle, arrives to take control of the situation and apologizes for his students' behavior. Fumio is impressed by Chen's skill and converses with him, and Chen learns that his master Huo Yuanjia has died after losing in a match against a Japanese martial artist. Chen is distraught after hearing the bad news and he leaves for Shanghai immediately.
Chen returns to Jingwu School and sees that his old friend — his master's son Huo Ting'en (Chin Siu-ho) — has become the new master of the school. The next day, Chen goes to the Japanese dojo to challenge Ryoichi Akutagawa (Jackson Liu), the Japanese fighter who allegedly defeated Huo Yuanjia. Akutagawa's students attempt to force Chen out with violence, but Chen defeats them all with ease. Akutagawa arrives on the scene and honorably accepts Chen's challenge. Chen defeats Akutagawa easily and concludes that Akutagawa is not capable of defeating his master, after which he suspects foul play in Huo Yuanjia's death. Chen has Huo's corpse exhumed for an autopsy against the wishes of Huo Ting'en and Jingwu's members. The coroner reveals that Huo Yuanjia was poisoned and weakened before his match against Akutagawa. Over the next few days, word of Chen's victory against Akutagawa spreads and Chen becomes a local celebrity in Shanghai. Jingwu's students begin to look up to Chen as their new instructor, which incurs the jealousy of Huo Ting'en. Huo remains silent and seeks comfort in a brothel, where he becomes romantically involved with a prostitute Rose (Ada Choi).
Meanwhile, Akutagawa confronts General Gō Fujita (Billy Chow) of the Imperial Japanese Army after realizing that his match result with Huo Yuanjia was pre-meditated by Fujita, which he considers dishonorable. After a heated argument, Fujita kills Akutagawa brutally in front of the shocked Japanese ambassador (Toshimichi Takahashi), but places the blame for this on Chen Zhen. Akutagawa's enraged students attack Jingwu School, culminating in a fight, that is eventually stopped by the local police. Chen is arrested and placed on trial for allegedly murdering Akutagawa. Several "witnesses" provide false and conflicting accounts of the murder, but the court refuses to accept testimony from any Chinese defense witnesses on the grounds of "bias" towards Chen. Mitsuko arrives and testifies that Chen is innocent because he spent the night with her, and the court accepts her false testimony because she is a Japanese. Chen is exonerated, but his apparent relationship with Mitsuko ruins his reputation, as the Chinese view it as an act of treachery. Huo Ting'en and the senior Jingwu members demand that Chen either leave Mitsuko or leave the school, and Huo uses the opportunity to settle his personal vendetta against Chen by challenging Chen to a fight. Chen defeats Huo eventually with much reluctance but chooses to leave with Mitsuko. Huo Ting'en is humiliated by his defeat and gives up his position as master of Jingwu before leaving to join his lover. Jingwu's members eventually discover Huo's relationship with her and reprimand him. Huo learns his lesson and returns to Jingwu.