In Shanghai during the 1930’s, Sing (Stephen Chow) and his friend Bone (Lam Chi-chung) attempt to join the Deadly Axe Gang, which ruthlessly controls the city under the leadership of Brother Sum (Danny Chan Kwok-kwan).
Sing seeks to restore his confidence after being humiliated as a young boy while trying to protect a mute girl from bullies, due to the failure of the Buddhist Palm method he had learned from a pamphlet he bought from a beggar. Sing and Bone attempt to intimidate the residents of Pig Sty Alley but are chased off by its Landlady.
Hearing of this, Sum orders Sing and Bone captured, while sending the Gang to reassert its authority in the wake of the humiliation. Three of the tenants, Coolie (Xing Yu), Tailor (Chiu Chi-ling), and Donut (Dong Zhihua), reveal themselves to be martial arts masters, defeating more than fifty of the Gang.
Fearing retribution, the Landlady evicts the three, but they encounter a pair of hired assassins who fight using a magical guqin that launches invisible blades. Coolie is beheaded, and Tailor and Donut are mortally wounded before the Landlady and her husband the Landlord reveal that they too are martial arts masters, having gone into self-exile after the death of their son. The two defeat the assassins but Tailor and Donut die from their injuries. The Landlords temporarily evacuate the other tenants for their safety…who could save them?