Daniel and his mother move from New Jersey to California. She has a wonderful new job, but Daniel quickly discovers that a dark haired Italian boy with a Jersey accent doesn't fit into the blond surfer crowd. Daniel manages to talk his way out of some fights, but he is finally cornered by several who belong to the same karate school. As Daniel is passing out from the beating he sees Miyagi, the elderly gardener leaps into the fray and save him by outfighting half a dozen teenagers. Miyagi and Daniel soon find out the real motivator behind the boys' violent attitude in the form of their karate teacher. Miyagi promises to teach Daniel karate and arranges a fight at the all-valley tournament some months off. When his training begins, Daniel doesn't understand what he is being shown. Miyagi seems more interested in having Daniel paint fences and wax cars than teaching him Karate.
Picks up where the first movie (Karate Kid) leaves off. Mr. Miyagi and Daniel take a trip to Okinawa to visit Mr Miyagi's dying father. After arriving Mr Miyagi finds he still has feelings for an old love. This stirs up trouble with an old rival that he originally left Okinawa to avoid. In the mean time Daniel encounters a new love and also makes some enemies.
John Kreese, his life in tatters after his karate school was defeated by Daniel and Miyagi, visits Terry Silver, a Vietnam War comrade. Terry is a ruthless businessman and martial arts expert, and he vows to help Kreese gain revenge on Daniel and Miyagi, and reestablish Cobra Kai. Upon returning from Okinawa, Daniel and Miyagi discover that their apartment building has been demolished, which brings Miyagi out of work. Going against Miyagi's wishes, Daniel uses his college funds to realize Miyagi's dream of opening a bonsai tree shop, and becomes a partner in the bonsai business.
During a commemoration for Japanese soldiers fighting in the US Army during World War II, Mr. Miyagi meets the widow of his commanding officer. He gets to know her granddaughter Julie, an angry teenager who is still feeling the pain of losing both her parents in an accident and is having problems with her grandmother and her fellow pupils. Mr. Miyagi decides to teach her karate to get her through her pain and issues and back on the right path.
Thirty years after the events of the 1984 All Valley Karate Tournament, Johnny Lawrence’s life has taken a rocky turn as he tries to forget a past that constantly haunts him. He seeks redemption by reopening the infamous Cobra Kai karate dojo. But the LaRusso-Lawrence rivalry of yesteryear is reignited when their lives become intertwined with the next generation of “karate kids.”
Present day Daniel LaRusso lives a charmed life. That is, until he sees that the Cobra Kai dojo, the source of his teenage angst and rivalry, has been reestablished by Johnny Lawrence. Struggling to launch the business, Johnny starts teaching karate to his teenage neighbor Miguel. Daniel faces his former opponent and old offenses are quickly reignited.