KFH

In 1940s Shanghai, a powerful gang called the Crocodile gang terrorizes the police. However, the gang was easily and brutally defeated by a much more powerful gang known as the The Axe Gang, led by a young killer named Brother Sum and an unnamed vice general. Only Shanghai's poorest villages and slums are not affected by the Axe gang's killings. One of those slums is Pigsty Alley. Two thieves named Sing and Bone visit the village to extort the residents by pretending to be Axe gang members, though Sing and Bone are revealed to be very weak and horrible at fighting. However, Sing's stupid actions eventually attract the attention of some real gang members and their vice general after he threw a firecracker that exploded onto the vice general's head. Just as the vice general was about to kill one of the residents, an unknown force blows him 50 feet back while also breaking his back, causing the full gang to arrive. However, they were all quickly dealt with by three of the slum's tenants: Coolie (who revealed himself to be the one who killed the vice general), Tailor, and Donut, who are actually Kung fu masters. However, fearing the Axe Gang's retaliation, the slum's Landlady evicts the trio.

The gang captures Sing and Bone and Brother Sum tried to kill them for posing as gang members. However, Sing and Bone narrowly escape using their lock picking skills, impressing Brother Sum, who offers to let them join the Axe Gang, on the condition that they kill someone. Sing recalls his childhood to Bone when he was tricked by a vagrant into buying a martial arts pamphlet with his meager savings. After practicing the pamphlet's Buddhist Palm technique, Sing attempted to save a non-verbal girl named Fong from bullies, but was instead beaten and humiliated. Sing became adamant that heroes never win, and resolved to be a villain.

Sing and Bone return to Pigsty Alley to kill the Landlady by throwing a knife at her, but fail ridiculously as Sing ended up getting stabbed twice and bit by venomous snakes. They were then chased off the premises by the Landlady. Sing retreats to a traffic pulpit where his injuries mysteriously heal instantly. Meanwhile, Brother Sum, intent on vengeance against Pigsty Alley, hires two Harpists that use a magical guzheng as their weapon. They successfully eliminate all three masters, but are destroyed by the Landlady and her husband the Landlord, who reveal themselves to be extremely skilled fighters.

Sing attempts to rob an ice cream vendor, but discovers that she is actually Fong. When she recognizes him and offers him a lollipop, which reminds him of the day he tried to save her, he smashes it and leaves. When Sing returns to the gang’s casino, Brother Sum offers him immediate gang membership if he uses his lock-picking skills to free the Beast, a legendary and extremely powerful assassin, from a mental asylum. Sing succeeds and brings the Beast back to the Axe Gang's headquarters.

Brother Sum is initially skeptical of the Beast due to his flippant attitude and sloppy appearance, but quickly changes his mind when the Beast stops a bullet midair. The Beast meets the Landlady and Landlord at the casino next door, engaging them in a fierce fight that ends in a stalemate, despite the Beast showing much better fighting skills and clever trickery. Sing, realizing the error of his ways, attacks Brother Sum and the Beast, who angrily retaliates but accidentally unlocks the Meridian (Chinese medicine)|Ren and Du channels in Sing. The Landlady and Landlord grab the unconscious Sing and flee. The Beast kills an angry Brother Sum and takes over as leader of the Axe gang.

The Landlady and Landlord treat Sing at Pigsty Alley and are surprised by his quick recovery. The Landlady deduces Sing is, in fact, a natural-born kung fu genius. With his newfound powers, Sing effortlessly dispatches the Axes before fighting the Beast. Sing uses the Buddhist Palm technique to neutralize the Beast, who concedes defeat.

Sing and Bone open a candy store with Fong's lollipop as their logo. Fong visits Sing at his store, and the pair hold each other's hands as they appear to be younger version of themselves. The vagrant who sold the pamphlet to Sing can be seen outside selling other pamphlets.