On the strength of the massive success of the first two films, Daniel (Ralph Macchio) and Mr. Miyagi (Pat Morita) take up where they left off, returning from Okinawa and hoping for a peaceful life in their bonsai shop. But their serenity is shattered when Daniel is blackmailed into competing against the vicious "Bad Boy of Karate," Mike Barnes (Sean Kanan). Though Daniel clearly needs Miyagi's help, he refuses, claiming that fighting for a trophy violates the spirit of karate. A new teacher manages to convince Daniel that he should learn a combat-style karate technique diametrically opposed to Miyagi's system, but when Daniel learns that the teacher, Barnes and an old enemy are setting him up for a slaughter, he has to beg Miyagi for help. With Daniel now humbled and focused, Miyagi prepares him for the championship match.