During a stormy night, two warriors stand against each other. One of them charges up with ki energy and unleashes a deadly technique: the hadouken! This man is Gouki.

Standing opposite Gouki is his master, Goutetsu. Nearby, two others are running towards the site of the battle. But it seems that the student has surpassed the master, as Gouki throws out a projectile that sends Goutetsu flying into a tree.

Gouki rushes over and goes to punch him, but Goutetsu gets out of the way. He strikes back and hits Gouki with a hurricane kick, then prepares a hadouken.

Goutetsu notices that Gouki has gone into a stance. He recognizes the technique immediately: shun goku satsu! Seconds later, a huge explosion rocks the dojo the two were fighting in. As the dust clears, Gouki is still standing...

...but Goutetsu has suffered a bloody death. As Gouki stands there, the sign of the heavens appears in the sky above him.

Several years before this fight, Gouki woke up to find that he had lost a fight. A girl called Sayaka is tending to his wounds, as he sees another man sitting at the dojo. This man is Gouken, who asks how badly Gouki has been hurt. He reminds him that they were meant to be having a non-contact sparring session, but he had had to take action when Gouki starting using a forbidden skill: the dark hadou. It's a technique that their master has forbidden.

Sayaka warns Gouki that his wound could got infected real bad. He lets her treat him. Later on, Sayaka is watering the flowers outside the dojo. Inside, Gouki's master, Goutetsu, yells as Gouki for using the dark hadou. He says it's forbidden, but Gouki doesn't understand why. Goutetsu wonders how many times he has to tell him this: he cannot use the dark hadou.

Gouki says that he doesn't want to mindlessly follow this path, and that he doesn't agree that the teachings of their predecessors is absolute. No matter what the sacrifice is, or how much blood is shed, he believes in having the courage to tread down a thorny trail. Something that should be a goal for any martial arts master. Goutetsu sighs and gets up. He tells Gouki that what he says isn't about courage -it's only arrogance.

He leaves the room, and Gouki angrily follows him, only to find Sayaka outside. She says that this may be hard for him to believe, but her father only wants what is best for him. Gouki says he knows that, but he wanted his master to understand that he has his own path to follow. He then walks off...

...but he suddenly falls down. Sayaka rushes to his side and asks what is wrong with him, but he says it is nothing and gets up, telling her to stay away from him. Later on that night, Goutetsu and Gouken have a private conversation about Gouki. Goutetsu says that, from Gouki's appearance now, he must have been secretly using the dark hadou.

Goutetsu had hoped that this day would never come, but it has. He says that the karma that is flowing through their bodies is bad karma indeed. They can't wait any longer -they have no other choice. He knows what he must do, and the consequences for if he fails will be unacceptable. He tells Gouken that he will end this cycle of bad karma. Sometime later, Sayaka finds that her father and Gouki are fighting.

She goes to Gouken, and informs him that both her father and Gouki are gone. Back at the fight, Goutetsu tells Gouki that seeing him like this is a great disappointment... it's deplorable.

Sayaka and Gouken go out to look for Gouki and Goutetsu, but Sayaka suddenly stops and falls, vomiting. Gouken realizes that she must be pregnant, but she tells Gouken to go on. But before he can, they get hit by a powerful blast of wind. Gouken runs on and finds Gouki... but also finds that his master is dead.

Gouki has killed him with the shun goku satsu, a technique which has altered Gouki's own appearance, making his face look more like that of a demon. Gouki takes the beads off his deceased master's neck and puts them around his own, as he walks away. Gouken runs up to his master and screams at Gouki: why would he do something like this?

He asks if he's just going to throw everything he had away, and if he's going to leave. He thinks Gouki has gone completely insane, but Gouki says nothing. Instead, he walks off towards a forest.

Several years later, a man called Ryu walks down a road. He finds the place he was looking for: the dojo he used to train at. He finds a girl watering some flowers nearby, and she asks him if there was someone he knew here.

He says that his master used to live here, and finds out that the girl lives nearby with her father and mother. She says she often waters the flowers around the dojo. She asks if Ryu would want to do that, but he declines, saying he has to deliver a bottle. The girl says she understands, and then leaves.

Ryu arrives at the dojo, and sees that the place hasn't changed since his last visit. But then suddenly, things go very dark. Ryu gets up and asks what the hell is going on, when he sees that someone else is standing at the entrance to the dojo: Gouki!

Ryu has a grudge against Gouki: he was the one who killed Gouken, his master! Ryu wants to fight him now, and accepts the challenge he has made by appearing, but Gouki says nothing. After waiting for a few seconds, he turns around and leaves. Ryu shouts out for him to wait...

...but then he wakes up. It seems he had been dreaming. He gets some food out and starts to eat, when he senses that he isn't alone. He tries to locate where the intruder is, but is too late to stop him from stealing some of his food. An old man is on the roof of the dojo, who congratulates him on being able to sense his presence, but he could still do with some more training.

Ryu wants to know who he is, but he just says that he is an old monk. The monk asks if Ryu plans to fight that man -which makes Ryu question how he knows about the dream he had with Gouki. But then the monk says that since he gave him a free lunch, he'll give him a free lesson. The monk jumps down and tries to land on Ryu, but the latter moves out of the way. Ryu thinks that he isn't a bad fighter for an old guy, but the monk then resumes his attack, and strikes Ryu in the face.

The monk hits Ryu with some kind of chi palm blast technique, which knocks him back. The monk asks Ryu what's the matter -he's not even fighting back! Or perhaps he's just not capable of doing so.

Ryu says he doesn't waste time fighting old men, but the monk thinks he's nothing but talk. He continues to attack Ryu, and uses a hurricane kick against him. Ryu realizes that this guy seems to have the same style as himself. Ryu tries going on the offensive, but the monk is easily able to parry his attacks.

Ryu keeps trying, but the monk strikes back with a couple of kicks. Ryu then manages to get him into a hold, and says this is it -he's now paralyzed.

The monk asks him if he's sure about that, and breaks out of the hold. He then hits Ryu with a palm strike, which has enough force to shove him through a wall of the dojo. Ryu gets up and says he was just going easy on him due to his advanced age, and starts to perform the hadouken technique.

The monk tells him that relying on the dark hadou is a bad idea. Ryu unleashes the projectile move anyway, but as it hits the monk, he manages to stop it! Not only that, he seems to be able to control it with his hands, and throw it back the way it came.

Ryu is shocked at this, so much so that he fails to move out of the way, and gets his by his own technique. Ryu gets blasted into a wall, and watches the old man rushing straight towards him, preparing to strike... but he actually just puts his hat on his head.

He asks if Ryu has had enough, and Ryu says he gives up. The monk says that he likes him though, and he should come over to his place. Later on, at the old man's home, the two are having a meal together.

Ryu wants to know what the old man's story is, but he just says that he is just a monk. The old man's granddaughter then walks in, and Ryu recognizes her -he saw her at the graves this morning. Her name is Fuka, and she asks if this man is the apprentice her grandfather mentioned to her earlier. He says that he is, which Ryu isn't too happy about -he never agreed to become an apprentice to him or anyone else, what is he talking about?

Fuka tells them to enjoy themselves and then leaves the room. The monk asks Ryu what he thinks about Fuka. Does he like her? He says he does out of politeness, but the monk takes that as a sign -he must want to marry her, right? Ryu spits out his drink. Ryu asks him what he is talking about, so the monk explains that he's getting old. He wants to see his granddaughter in her hour of glory, he wants to see his great grand kids. Fuka has overheard him and tells him to give Ryu a break.

The monk asks Ryu what he is training for. Ryu doesn't seem to know himself, so the monk tells him he is searching for something: the path to being a true martial arts master. He says he can stay here until he finds what he's looking for. He asks Ryu about that man he saw earlier today -he was a true demon, wasn't he? Ryu says that man was Gouki.

Ryu recalls the time he first saw Gouki. It was when he was still a kid, he can't remember exactly where or when it was, but when he did see Gouki, he was fascinated and scared of him at the same time. Ryu believes it is his fate to fight this man.

Back in the present, Ryu stays with the old man and Fuka. Whilst he trains hard, he can't seem to find any answers to the questions he has about himself, and his fated battle with Gouki. But then he isn't training all the time, and is dragged along with Fuka as she goes about her daily tasks.

Ryu isn't happy about being out here shopping. He needs to be preparing himself for his battle with Gouki. Gouki killed his master with just one blow. Whilst Gouken forbid Ryu to fight Gouki, Ryu thinks about what he himself wants to do. Fuka apologizes for bringing him out here, but Ryu says it isn't a problem.

As the two head back home, Fuka asks Ryu some questions about his life. She finds out that he has been studying martial arts every since he was little, but only got serious at them when he trained under Gouken. She also finds out that his parents died when he was little. Ryu knows that he was left at a temple when he was just a baby. He grew up a little bit and left the temple, but he was out of control, not knowing what to do with himself. He eventually met Gouken and began to train with him. His life seemed to be getting back on track...

...but then one day, that man appeared again. Gouki struck down Gouken, and Ryu wanted to make him pay. But the dying Gouken told him no.

Back in the present, Fuka asks why Ryu feels he needs to fight a man like Gouki. She explains that her father was also a martial arts master, who wanted to become a true martial arts master. One day, there was a big match, but her father died during the match. She begins to cry and asks Ryu to ignore her, but then they are both startled when another girl shouts out to them -she has found the one she was searching for: Ryu!

NOTES

-The old monk is never given a real name. He's listed as "Old Master" in the credits.