At the Mid-County Community Center, a coach quits teaching a ragtag team martial arts. Community Center leader Charlie looks for a new coach but is unsuccessful, until an old friend returns home. Former mixed martial arts champion Jimmy "The Lightning Bolt" Lee arrives. He had been Charlie's protege and father figure for many years. An accident three years ago was supposed to have ended Jimmy's career. When Charlie asks Jimmy to teach the group, he is reluctant at first, but decides to do it while contacting his agent to get him another fight. At first, the kids are reluctant to learn from Lee and each of the kids have issues of their own.
Wyatt's mother is attempting to find work and he feels embarrassed by their living situation after she attempts to go to the movies with home-brought popcorn. Raymond is constantly berated by his father because of his weight, which causes him to be bullied. Leticia, who works with her father selling oranges on the sidewalks, longs to have a manicure and her nails painted like other girls. Alex and Sean are the runts of the group and are teased because of their size. Ricky falls in with the wrong group, led by "Big Guy", a small person who has beaten Wyatt up one day. When Jimmy confronts "Big Guy" and his gang, he tells Ricky he has potential and that he must decide what to do with that potential. "Big Guy" and Ricky eventually have a change of heart and decide to side with Jimmy.
When Jimmy and the kids go to their first competition, Jimmy meets childhood rival Ted Barret, who is the coach of the three-time national karate champions, the Beverly Hills Scorpions. Ted has always held a grudge against Jimmy and lets his current fame influence others, despite the objections of his own son Eric. When the kids are humiliated, Jimmy decides to find a sponsor. However, Ted's influence leads Jimmy to a road of nowhere until old friend and food truck owner Big Mama decides to sponsor him. However, to get the sponsorship, Jimmy goes to the next competition dressed up as a big hot dog, even furthering the humiliation of the kids. When the kids learn Jimmy got them a sponsor, they are happy until they learn they will be known as the "Underdogs". When Big Mama tells the kids what Jimmy had gone through to get them sponsored and that no one would take them, the kids finally decide to go along with being the Underdogs. As they begin to train hard, Jimmy brings in a new member, the very quiet yet violent-prone Rasheed, whose mother wants him to learn martial arts for self-discipline.
While the kids improve and begin to win, they win a big tournament that will lead them into a showdown with the Scorpions. As they begin to prepare, Alex and Sean's aunt Valerie teaches the Underdogs ballet and dance to help the kids with their rhythm. Scorpion members Andrew, Jake, and Cameron find the kids at dance school and secretly videotape the class. They post it to Youtube and the next day, the kids are teased, especially Rasheed, who is revealed to have a speech problem. Rasheed gets suspended but Jimmy finally has a talk with him. Jimmy and Rasheed learn they have a lot in common and decide to work together. However, Jimmy is finally given an opportunity to return to MMA and must leave the day before the big showdown. As he flies out to Las Vegas, he looks at the contract and realizes that MMA is not for him anymore. Jimmy walks away and returns in time for the big showdown between the Underdogs and the Scorpions.