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After Po is tapped to become the Spiritual Leader of the Valley of Peace, he needs to find and train a new Dragon Warrior, while a wicked sorceress plans to re-summon all the master villains whom Po has vanquished to the spirit realm.

In the Chinese Spirit Realm, Grand Master Oogway fights against Kai and has his chi stolen. Grand Master Oogway warns Kai that Po, the Dragon Warrior, will stop him. Meanwhile, Master Shifu announces his retirement and passes the role of teacher to Po. He discovers that teaching kung fu is not easy, as the Furious Five members Master Tigress, Master Crane, Master Mantis, Master Viper, and Master Monkey are injured as a result. Po is demoralized as a teacher, but is told by Master Shifu to be himself.

Po and his friends fight to stop a peacock villain from conquering China with a deadly new weapon, but first the Dragon Warrior must come to terms with his past.

In the Valley of Peace, Po the Panda finds himself chosen as the Dragon Warrior despite the fact that he is obese and a complete novice at martial arts.