The film is set in Beijing, China in 1900 during the Qing dynasty just before the Battle of Beijing. Wong Fei-hung plans to return to Foshan with his father Wong Kei-ying and apprentices Leung Foon and Clubfoot. He also meets 14th Aunt, 13th Aunt's sister, who has a romantic crush on him.
Just as Wong is about to leave, a Manchu general, A'lan Chengdu, shows up and tells him that the Eight-Nation Alliance has challenged China to participate in an international lion dance competition. The general is eager to recruit Wong to join him in representing China in the competition because Wong was the champion of the national lion dance competition in the third film. Since the competition is an international one, the contestants are not limited to using only lion masks; other animal masks, such as dragon, centipede and eagle, are also present. Wong understands the gravity of the situation – China must win to uphold its sovereignty and regain lost national pride – and promises A'lan Chengdu that he will join the competition.
The Red Lantern Sect is a feminist and xenophobic cult that goes around killing foreigners and destroying everything regarded as alien to Chinese culture. Its members are all female and are mainly armed with rope weapons, bows and ether-filled lanterns. When the cult attacks a German medical clinic, Wong intervenes and tries to stop them from killing the foreigners. German soldiers armed with rifles show up and capture Wong and Miao Sanniang, one of the cult members. A Catholic priest, Father Thomas, comes to Wong's aid and helps him and Miao escape from prison. In the meantime, the Red Lantern Sect's leader mistakenly believes that Wong has kidnapped Miao, so she sends her followers to attack and capture Wong's companions. Wong goes to the cult's headquarters, fights his way through complex formations with Miao secretly helping him, defeats the cult leader and saves his companions.
Wong is late for the lion dance competition because he was dealing with the Red Lantern Sect, so A'lan Chengdu and his dragon dance teams have already started without him. The competition turns out to be a brutal massacre as the other contestants have not only equipped their animal masks with various deadly weapons, but are also resorting to dirty tricks to ensure victory. By the time Wong reaches the competition arena, it is already too late as A'lan Chengdu is killed by gunfire from a machine gun mounted on top of the stand where the champion's medal is.
After paying his respects at A'lan Chengdu's funeral, Wong sends Clubfoot to issue a challenge to the German general who oversaw the competition and request for a rematch. The general agrees. That night, the Red Lantern Sect causes trouble again by attacking a church. Miao Sanniang attempts to stop her fellow cult members from killing Father Thomas and ends up dying at the hands of her senior. Wong shows up, defeats the cult members and rescues Thomas and other foreigners. At the same time, the cult leader fights with Clubfoot until they are interrupted by German soldiers. Clubfoot escapes and hides, while the cult leader is slain by the German general's henchmen, Iron Fist and the rapier-wielding Duen Tin-lui.
The following day, Wong and his well-prepared lion dance teams enter the competition arena to pit themselves against the other contestants. Shortly after they emerge victorious, they receive news that the forces of the Eight-Nation Alliance have defeated Chinese forces and occupied Beijing. Wong is enraged and wants to kill the German general to avenge A'lan Chengdu. He teams up with Clubfoot to defeat and kill Iron Fist and Duen Tin-lui, who try to stop them from killing the general. However, the general still manages to escape even though he is seriously injured. Wong realises that it would make no difference even if he killed the general because he cannot reverse the situation in Beijing, so he heads back to Foshan with his companions.Vincent Zhao as Wong Fei-hung
Jean Wang as 14th Aunt
Max Mok as Leung Foon
Hung Yan-yan as Clubfoot
Lau Shun as Wong Kei-ying
Billy Chow as Iron Fist
Chin Kar-lok as Duen Tin-lui
Wang Jinghua as Miao Sanniang
Louis Roth as Father Thomas
Chen Jiming as A'lan Chengdu
Wang Zhiwen as A'lan Chengdu's deputy
The absence of Jet Li and the reduced input of Tsui Hark heavily affected the film's box office earnings. However, these factors also allowed the film to be produced at a much lower budget. Despite many negative reviews, the film grossed HK$11,301,790, a return significant enough for the producers to go ahead with the next film in the franchise, Once Upon a Time in China V.