Around a thousand years ago, Xu Wenwu discovers the mystical ten rings which grant godly powers including immortality. He establishes the Ten Rings organization, conquering kingdoms and toppling governments throughout history. In 1996, Wenwu searches for Ta Lo, a village said to harbor mythical beasts. He travels through a magical forest to the village entrance but is stopped by a guardian, Ying Li. The two fall in love, and when the Ta Lo villagers reject Wenwu, Li chooses to leave with him. They marry and have two children, Shang-Chi and Xialing. Wenwu abandons his organization and locks away the ten rings.

When Shang-Chi is seven years old, Li is murdered by Wenwu's enemies, the Iron Gang. Wenwu dons the ten rings once again, massacres the Iron Gang, and resumes leadership of his organization. He makes Shang-Chi undergo brutal training in martial arts but does not allow Xialing to train with the others, prompting her to secretly teach herself. When Shang-Chi is 14, Wenwu sends him to assassinate the Iron Gang's leader. After completing his mission, a traumatized Shang-Chi runs away to San Francisco and adopts the name "Shaun".

In the present day, Shang-Chi works as a parking valet with his best friend Katy, who does not know about his past. They are attacked on a bus by the Ten Rings, who steal a pendant that Li gave to Shang-Chi. Shang-Chi flies out to meet his sister, fearing that the Ten Rings will go after her matching pendant. He reveals his past to Katy, who insists on helping him. They find Xialing at a secret fight club in Macau, which she founded after escaping from Wenwu at sixteen. The Ten Rings attack the fight club, and Wenwu arrives to capture Shang-Chi, Katy, Xialing, and her pendant.

They are taken to the Ten Rings' compound, where Wenwu uses the pendants to reveal a mystical map leading to Ta Lo. Wenwu explains that he has heard Li calling and believes she has been held captive in Ta Lo behind a sealed gate. He plans to destroy the village unless they release her. When his children and Katy object, he imprisons them. The three meet former actor Trevor Slattery, whom the Ten Rings imprisoned for impersonating Wenwu,and his hundun companion Morris, who offers to guide them to Ta Lo.