Daniel and his mother, to move from Newark, New Jersey to the "South Seas" apartment complex in Reseda, California due to Lucille's job transfer. Upon arriving, Daniel befriends one of his neighbors, Freddy, who invites him to a beach party. It is at this beach party that Daniel first encounters Ali Mills (Elizabeth Shue), and is instantly infatuated with her. He also inadvertently runs afoul with Johnny Lawrence, Ali's ex-boyfriend and leader of the Cobra Kai, while he is trying to reconcile with Ali on the beach. A confrontation ensues that leaves Daniel beaten and humiliated. In the succeeding weeks, Daniel frequently falls under the ire of Johnny and the rest of the Cobra Kai gang, who constantly bully and attack him. This conflict finally comes to a head at their high school Halloween party, where Daniel soaks Johnny with water in one of the bathroom stalls. After nearly being killed by Johnny, Daniel is saved by his apartment's maintenance man, John kreese After saving Daniel Mr.Miyagi begins to teach him the ways of karate. Daniel later defeats Johnny on at the match, the crowd and everyone is amazed and cheers Daniel on. His mom rewards him with sloppy seconds. The movie ends with Mr.Miyagi smiling.
As Daniel and Mr. Miyagi are leaving the All Valley Tournament they overhear John Kreese berating Johnny for not winning first place . When Kreese starts to mercilessly strangle Johnny, Mr.Miyagi intervenes and eventually saves him. Six months later, Daniel angrily comes to Mr. Miyagi's house with his car steaming stating that Ali did something to the car. He also tells him that Ali has fallen in love with a football player as well. He eventually goes to Okinawa with Mr. Miyagi. He befriends a girl named Kumiko who's now his new girlfriend. Daniel becomes enemies with Chozen who is Sato's(Mr. Miyagi's enemy) nephew. Mr. Miyagi's relationship with Sato is fixed when Miyagi saves him. He disowns Chozen because he didn't help save other people. As Kumiko is performing a dance Chozen who is still angry takes her hostage. Daniel fights and wins.