Eleven-year-old Randy Daytona becomes anxious when he learns that his father Peter has bet on his performance in the 1988 Summer Olympics table tennis tournament finals. During his semi-final game against Karl Wolfschtagg of the German Democratic Republic, Daytona has an accident and suffers an injury. Unable to continue, he loses the match. Loan sharks, in the employ of criminal mastermind Feng, murder his father, and Daytona leaves competitive ping-pong.
Nineteen years later, Daytona is dismissed from the Peppermill casino and meets FBI agent Ernie Rodriguez, who requests his assistance in arresting Feng for running guns. Feng's hidden jungle hideout hosts a black-market Ping-Pong tournament, and Daytona's invitation is a way for the FBI to infiltrate Feng's organization. When Daytona agrees, Rodriguez tells him to win enough championships that Feng's scouts notice him. After losing a local tournament, Daytona is apprenticed to a blind man in Chinatown named Wong, who was Feng's former mentor. Daytona also meets Wong's niece, Maggie. When locals vandalize Master Wong's house for violating their edict against teaching white people ping pong, Daytona is forced to play against "The Dragon", a young girl, in exchange for Wong's right to stay. After Daytona beats the Dragon and gets punched, Feng's men take notice of his win and bring Daytona, Rodriguez, and Wong to Feng's facility.
Daytona handily beats his first opponent, Freddy "Fingers" Wilson, though he is unnerved to learn that the tournament is literally sudden death—the loser is killed by a poisoned dart delivered by Feng's majordomo, Mahogany. After Daytona attempts unsuccessfully to escape, Feng invites him to join his side and reveals that he only finished half of Wong's training. He says it would be the ultimate satisfaction to win Daytona away from Wong. Feng also shows Daytona his specially modified ping-pong table. It is wired to special vests that give increasingly powerful and fatal electrical shocks for failure. Daytona informs Rodriguez of a hidden cache of illegal guns that are sufficient to put Feng in jail. While Rodriguez investigates the hidden facilities, Daytona defeats numerous opponents for his life.
Upon learning that Wolfschtagg is his last opponent, Daytona requests extraction. Rodriguez comes up with a plan to brutally injure Daytona so that he has to quit. Rodriguez breaks Daytona's arm before Daytona can tell him that he has changed his mind. Feng discovers Rodriguez's attempts to contact the FBI and forces Daytona to face Wolfschtagg, then substitutes Maggie. When Wolfschtagg protests, Feng kills him. Daytona plays one-handed and tries to stall for time. Maggie tries to lose on purpose to sacrifice herself. However, Daytona uses his ping-pong expertise to hit Maggie with the ball. While this goes on, they escape together. Enraged, Feng orders them both executed. Mahogany shoots a poisonous dart at Daytona, but Maggie defends him with the ping-pong paddle. Daytona then throws the poisoned paddle back at Mahogany, killing her. The FBI swarms the place, during which the heroes attempt to escape, but Daytona's attempts to rescue Feng's slaves cause their capture. Feng plays Daytona to determine which of Wong's students is the superior ping pong player.
During the game, Daytona trips Feng's Bodyguard who was carrying the self-destruct button thus setting off the self-destruct sequence's five-minute countdown. Feng reveals there is no way to turn off the suits. He also states that he changed the rules so that the ball can now be bounced off any surface once and still be in play. As the self-destruct sequence countdown progresses, the game moves through several buildings and finally onto a bridge over a nearby river. After Wong informs Daytona that Feng has a weak backhand, Daytona exploits his weakness, and Feng is electrocuted, falling into the river. Daytona and his friends, along with Feng's slaves, escape in Wong's boat as the facility explodes. Two months later, the major characters are reunited for the reopening of Master Wong's rebuilt Mushu shop while also still hosting ping-pong games. Wong then accidentally falls down the elevator shaft, with Randy, Rodriguez, and Maggie being shocked after looking down. The movie ends with the cast singing "Pour Some Sugar on Me".