The film is set in China in 1895 during the Qing dynasty. Wong Fei-hung travels by train from Foshan to Guangzhou to attend a seminar on medicine. He is accompanied by his romantic interest 13th Aunt and apprentice Leung Foon. The situation in Guangzhou is rather chaotic. On one hand, there are protests in the streets against the signing of the Treaty of Shimonoseki. On the other hand, the White Lotus Sect, an extreme xenophobic cult, goes around attacking Westerners and destroying everything regarded as alien to Chinese culture. At one point, 13th Aunt is almost captured by the cult when she tries to take a photo of them, but Wong shows up, fights with the cult members, and saves her.
Wong gives a lecture on acupuncture at the seminar while a Western-trained Chinese doctor, Sun Wen, helps him translate for the predominantly non-Chinese audience. The seminar is disrupted when the White Lotus Sect shoot flaming arrows into the building; Wong, Leung and Sun manage to escape safely. Wong feels that Guangzhou is not safe and wants to bring Leung and 13th Aunt with him back to Foshan. However, just as they are about to leave, they learn that the White Lotus Sect is attacking the Tongwen Guan, a school for children to study foreign languages. They head over and save the children. The innkeeper refuses to allow the children to remain in his inn because he is worried about retaliation by the White Lotus Sect.
Wong goes to the yamen to ask if the children can take shelter there. He spars with a military officer, Nap-lan, who is impressed with his skill but does not approve his request. In the meantime, Leung and 13th Aunt bring the children to hide in the British consulate, which is under siege by the White Lotus Sect. At the consulate, Wong meets Sun Wen again and learns that Sun and his friend, Lu Haodong, are part of an underground movement seeking to overthrow the Qing dynasty and establish a republic in China. Nap-lan shows up with his soldiers and tries to enter the consulate to capture Lu but the British consul stops him. That night, Nap-lan orders his men to disguise themselves as White Lotus Sect members and break into the consulate. After some time, he leads his soldiers into the consulate under the pretext of protecting the consul and arresting the cult members while actually using the opportunity to hunt down Lu. He secretly kills the British consul when the latter sees through his ruse.
Lu disguises himself as Leung and follows Wong out of the consulate, while Leung pretends to be Lu to lure Nap-lan and his soldiers away. Wong and Lu then travel to the White Lotus Sect’s base to confront Priest Kau-kung, the cult leader. After fighting with the cult members and engaging Kau-kung in a one-on-one fight, Wong defeats Kau-kung and kills him by knocking him onto a protruding sharp point. Wong, Leung and Lu then proceed to retrieve a book, which contains the names of the revolutionaries, from a secret location, but they run into Nap-lan and his men. Lu is shot but manages to burn the book to prevent Nap-lan from getting it. Wong fights with Nap-lan while Leung helps Lu burn the book. Leung almost burns the cloth used to wrap the book. Before succumbing to his wounds, Lu stops Leung from burning the cloth and tells him to meet Sun Wen at the pier and pass him the cloth. Wong and Leung try to escape but are cornered by Nap-lan. In the end, Wong defeats and kills Nap-lan by cutting his throat with a wooden splinter. As dawn approaches, Wong and Leung arrive at the pier just as the ferry is leaving for Hong Kong. Wong throws the cloth to Sun Wen, who opens it up to reveal Lu’s design of the Blue Sky with a White Sun flag.