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The film is set in the early 20th century in Shanghai International Settlement. The martial arts student Chen Zhen returns to Jingwu School to marry his fiancée Yuan Le-erh. However tragic news awaits him; his master Huo Yuanjia had died, apparently from illness. Chen is deeply saddened and traumatised by the sudden demise of his teacher. Not long after the funeral; two Japanese students from the Bushido School and man working for Hiroshi Susuki in Hongkou, show up. They present a sign to Jing Mo School, bearing the words "Sick Men of East Asia" (東亞病夫), seemingly as to insult Huo Yuanjia, describing the Chinese as "weaklings" in comparison to the Japanese. They taunt the Jing Mo students to fight them and promise that they will "eat their words" if the Jing Mo students dare to fight and defeat them.
Shortly after, Chen Zhen goes to the Hongkou Dojo alone to return the "gift" (the sign). He meets with hostility from the Japanese students and they engage in a fight. Chen Zhen defeats all of them, including their Sensei, single-handedly and effortlessly. He uses his master's style of fighting Mizongyi and a Nunchaku as a weapon during the fight. He smashes the glass on the sign and makes the students who taunted him earlier chew up the paper bearing the derogatory words, so as to make them literally "eat their words".
Chen takes a stroll to a park after that. He is refused entry into the park by a Sikh guard who points towards a sign reading "No dogs and Chinese allowed" (狗與華人不得入內). After the guard allows a foreigner to bring her pet dog into the park, a Japanese man approaches Chen and tells him that if he behaves like a pet dog, he will be allowed to go in. Chen beats up the man in anger and proceeds to smash the sign with a flying kick.
This film is one of Bruce Lee's most influential works, as it is one of the main reasons behind the shift in Hong Kong cinema from swordplay to empty-handed fighting, which initiated the "Golden era of Kung Fu Cinema" of the 1970s