Wing Chun master Ip Man and his family move to Hong Kong in the mid-1940s after their escape from Japanese-occupied Foshan. There, Ip desires to open a school to propagate his art, as well as make a living during the difficult times, but he has difficulty attracting students due to his lack of reputation in the city. One day, a young man named Wong Shun Leung appears and promptly challenges Ip to a fight, but is easily defeated. Wong leaves humiliated, only to return with some friends to gang up on him. Ip beats them as well. Stunned and impressed by his skills, Wong and his friends become Ip’s first students, bringing more disciples to help the school thrive.
Wong is later caught posting promotional posters for the school by some Hung Ga students. One of them challenges Wong to a fight and loses, but his friends take Wong hostage in revenge and demand a ransom from Ip. Ip goes to the local wet market as directed, but the meeting ends in a confrontation with a growing mob of Hung Ga students. Ip and Wong fight their way outside to meet Jin Shanzhao, a martial artist and former bandit, who comes to their rescue with his own gang. The students’ master and head of the coalition of Hong Kong martial arts clubs, Hung Chun-nam, arrives to break up the fight. Ip introduces himself, and Hung informs him that before setting up a school, he needs to attend a special fighting ceremony to test his worth. Ip, Wong and Jin are subsequently arrested by Officer Fatso for disturbing the peace but are later released on bail. Hung and Fatso are then shown to be acting as reluctant collectors for the martial arts schools (including Hung’s) as part of a protection racket headed by Superintendent Wallace, a corrupt officer in the Hong Kong Police Department.
Ip attends the ceremony and defeats his first challengers, before striking a draw with the last challenger, Hung. Ip is allowed to keep running his school on the condition that he pay his monthly protection fees, but he declines. Hung thus has his students loiter in front of the Wing Chun School and harass anyone interested, causing a street brawl between them and Ip’s disciples. Ip is thus forced to close up and move the school nearer to home. Ip soon confronts Hung, who blames him since he wouldn’t pay his protection fees, whereas Ip criticizes Hung’s management of his students. Hung insists that he is doing what he must and also insists they finish their fight, but during this encounter, Ip stops Hung from accidentally kicking his son as he suddenly appears, and also suggesting that Hung spend more time with his family by having dinner with them as it is more important than settling the duel. Ip earned some respect from Hung as a result. Ip leaves, and the next day, Hung invites him to a British boxing match he has helped to set up, quietly coming to terms with him.
The boxing competition allows for a demonstration by the various martial arts schools to help promote themselves and their Chinese culture. However, the event’s star boxer, Taylor “The Twister” Miller, an arrogant, racist and brutal man, openly insults and attacks the students, causing chaos as the masters try to restore order. Hung accepts Twister’s challenge to a fight so that he can defend his culture. At first, Hung’s wider range of skills allow him to overcome Twister’s natural size and muscular physique, and the two are evenly matched, with Hung having the slight advantage. However, in the second round Twister counters Hung’s attack with a left hook, and a right uppercut sends Hung to the canvas. Hung rises to his feet, but begins to succumb to Twister’s sheer power. As the fight progresses, Hung is hindered by his asthma, as Twister relentlessly continues to attack, and is eventually beaten to death, as he refuses to concede and allow the man to insult his culture and people. News of Hung’s death rapidly spreads throughout the enraged Chinese populace, causing a scandal that spurs Wallace to hold a press conference where he lies that Hung was the one who started the fight, that Hung’s death was an accident and that he was a weakling who died after a few punches. Twister announces that in order to clear his name he will accept any challenge from the Chinese to participate in a fair, public boxing match, but boasts on that he could kill every Chinese boxer in Hong Kong and that he doubts any of the Chinese are brave enough to face him. Ip Man arrives and challenges Twister to a fight. Fatso then secretly plots against Wallace.
As his wife goes into labor, Ip finishes training and begins his fight with Twister, using his more diverse techniques and great speed against Twister’s sheer muscle. Ip later receives an illegal punch from Twister, and is banned from kicking due to the judges changing the rules during the match, allowing Twister to seemingly overwhelm him. Inspired by Hung’s patriotic spirit, Ip changes his strategy by attacking the boxer’s arms and eventually defeats Twister. While the Chinese celebrate, Wallace is arrested by his superiors for corruption and abuse of power, as Fatso has secretly reported him before the match. Ip then gives a speech to the audience, stating that despite the differences between their race and culture, he wishes for everyone to respect each other regardless of their status. Both the Western and Chinese audience give him a standing ovation while Twister’s manager walks away, unhappy at the defeat. Ip goes home and reunites with his family, including his newborn second son, Ip Ching. Ip is later introduced to a boy named Bruce Lee who wishes to learn Wing Chun in order to beat up people he does not like. Ip smiles and simply tells him to come back when he has grown up.