Guile and Ryu fight each other, though it is obvious Guile has the upper hand. The sergeant easily overpowers Ryu, and then leaves the bar with his men, telling Ryu that he has guts. Ken takes Ryu home, then fights Guile at the Air Force Base in San Francisco, badly losing as well. This double defeat motivates the two boys to travel to Hong Kong in hopes of improving their fighting skills.

Ryu and Ken convince their young tour guide, Chun Li, to follow them to the Devil's Battle Cage in Kowloon Palace. Once there, Ryu enters the illegal martial arts tournament, easily defeating all his rivals, much to the chagrin of the Palace's boss, who orders to kill them on sight.

Ryu, Ken, and Chun Li fight their way out of Kowloon Palace, defeating all the foes they encounter. They almost get out of the infamous area, when boss Lean unleashes his two henchmen, Sodom and Gomorrah, to stop them from escaping. Ryu and Ken defeat them, only to find Lean has Chun Li held hostage. Chun Li's father Dorai, who is a policeman, shoots Lean in the hand just as he is about to fire at Ryu and Ken. All of them safely return to the boy's hotel, where Chun Li says she will take them to go see the martial arts master-turned-actor Fei Long next morning.

Ryu, Ken, and Chun Li visit Fei Long, who is filming a movie. The young actor picks Ken as a sparring partner for his next action scene, stating that "fights have to be real". Fei Long and Ken engage in a hard battle all over the set, only to be stopped by the film director when Ken hits Fei Long in the face, worrying about the actor's wellbeing.

Ryu, Ken, and Chun Li go shopping at a shopping mall. Once there, Ryu meets a strange old man who seems to be about to die. The old man insists on the boy taking him somewhere private, where he could use his ki to get his health back. Fascinated, Ryu follows the old man who teaches him about Master Daruma and his Hadou technique.

Evil drug cartel Ashura sets up a plan to kill Dorai, using Chun Li as bait. When Ashura's henchmen try to kidnap the girl, though, their plan falls apart, due to Chun Li's resistance and Ryu and Ken's intervention. The three then go to the family dojo to stop another Ashura attempt at Dorai's life, which is successfully foiled with the help of Fei Long.

Ryu and Ken decide to go to Thailand in hopes of learning Muay Thai. Once at Bangkok airport, Ashura's boss Donu plants some heroine in Ryu's backpack, who is then arrested and sent to prison. Here he endures brutal torture from Warden Nuchi and taunting from other prisoners, eventually coming to confront Sagat, a disgraced Muay Thai champion. Meanwhile, Ken does what he can to free Ryu from prison.

Sagat and Ryu battle each other in the prison courtyard, ending the fight in a draw. Sagat calls the fight off, realizing he and Ryu are kindred spirits and tells him that he also ended up in prison because of Ashura. Meanwhile, Ken tries and fails to capture Donu after a car chase, but manages to free Ryu from prison. Both Ryu and Ken are being served an expulsion decree, and must leave the country in 24 hours.

Ryu and Ken go to Ashura's secret hideout building, where they manage to defeat and capture Donu and his henchmen, bringing them to the police's custody. After this, they barely escape an attempt on their life, which prompts them to follow the killer to another Ashura's hideout in the forest, led by Zochi. Meanwhile, Dorai reaches Bangkok to interrogate Donu, but the boss is killed by Soong, another Ashura's killer who infiltrated Thai police. Dorai and the Thai police follow Soong to the forest hideout, where Ken and Ryu managed to fight off the criminals. With all of Ashura's men arrested, Sagat is freed from prison, after his innocence is proven. He then tells Ryu that if he wishes to learn about Hadou, he should travel to India, where a monk named Dhalsim lives.