Kreese, his life in tatters after his karate schools was defeated by Daniel and Mr Miyagi, visits Terry, a friend from Vietnam. Terry is a ruthless business man and a martial arts expert, and he vows to help Kresse take revenge on Daniel and Mr Miyagi.
Ostracised villain John Kreese attempts to gain revenge on Daniel and Miyagi, with the help of a Vietnam War comrade, the wealthy owner of a toxic waste disposal business.