"Once Upon a Time in China III" follows the story of Wong Fei-Hung and his sidekick Chung as they arrive in Peking. The Empress announces a Lion Dance martial arts contest, which Wong decides to participate in. Accompanying him is his cousin Yee, who is also his young, Westernized aunt-by-adoption and secretly betrothed to Wong.
Wong faces challenges in the form of a possible romantic rival, a Russian diplomat named Tumanovsky, who Aunt Yee knew from school. He also has to deal with a martial arts rival, Club Foot, who brutally beats up Wong's father. Club Foot works for the slimy Leung Fun, who is determined to win the prestigious Lion Dance contest at any cost.
As the story unfolds, Wong must navigate through romantic entanglements and martial arts rivalries. By the time the spectacular Lion Dance contest occurs, many things will change for Wong and his companions.