Chien Fu (Jackie Chan), an orphan adopted by a Kung Fu school, is overworked as their janitor while being bullied and abused by the Kung Fu teachers (Teacher Li (Dean Shek) who hits Chien for watching Kung-Fu classes and then walks all over the wet floor with sandals dipped in flour, to increase his work. Teacher Lian (Peter Chan) is incompetent as a Kung-Fu master) as a walking punching-bag (Lian & Li hits Chien mercilessly to demonstrate his power and mastery over Kung Fu), with the school's cook, Ah-Wu (Tino Wong), being his only sympathizer.Teacher Chui (Fung Ging-man) runs a rival school and tries to gain popularity by enrolling sons of local politicians and mayor. A beggar was sitting outside his school and Chui blames him for bad luck, when he can't sign the mayor's son. Chui & his students attack the beggar. Chien was passing by and comes to his aid. The beggar helps Chien defeat the students and Chui.Chien befriends an old beggar by offering him a meal and a place to stay. Teacher Li again uses Chien as a punching bag to showcase his school's mastery to the Mayor's son. The beggar sees this firsthand, and Ah-Wu explains the situation to him. Unknown to Chien, the old beggar is actually Pai Cheng-Tien (Yuen Siu-Tien), one of the last surviving masters of the Snake-style of Kung Fu. Pai starts training Chien in Kung-Fu. Pai is on the run from the Eagle Claw clan, which is viciously killing off all of the rival Snake-style masters. 3000 pupils have already been killed.Pai is ambushed by Eagle Claw student Su Chen (Hsu Hsia) and an assassin masquerading as a Christian missionary (Roy Horan) and is injured. Pai manages to escape but has been stabbed in the shoulder by the missionary. After being abused once more (Chien is made to fight the Mayor's son (without resisting), to showcase to the mayor that his son is learning something. But this time Chien uses some of Pai's teachings to avoid his attackers blows. The Mayor's son his humiliated and they leave. Li takes his anger out by beating Chien again), Chien later finds Pai and helps him recover at an abandoned building outside of town. Pai agrees to give him more lessons, on the condition that he does not call him "Sifu" ("master"), since they are friends. The real reason, however, is to keep Chien's connection with him secret from his pursuers. Pai also extracts the promise that Chien will never intervene if he sees Pai fight someone.Chien practices the lessons and learns to avoid being hurt by the school's bumbling teachers (When Li again wants to put flour dipped slippers on the wet floor, Chien skillfully puts wipes under his foot, to keep the floor clean). Teacher Chui's Three Provinces Champ (Lung Chen-Tien) attacks the school, and the champ easily defeats Teacher Li and Lian. As a result, all the students leave for the rival school. This is when Master Hung (Charlie Chan) returns from his travels and finds the school closed. Hung learns the situation from Chien and goes to challenge Chui and his Provinces champion.Hung is initially winning, but soon starts to be beaten up by the Champion. To everyone's amazement Chien intervenes and easily defeats their master using the snake style. Unfortunately, one of the passing wanderers who witnesses the fight is the high master of the Eagle Clan, Sheng Kuan (Hwang Jang-lee), who recognizes the style at once and decides to tail Chien.Chien meets Shang Kuan, who inquiries about the old beggar, claiming that he was a colleague of Pai's. As a show of 'proof', he easily fends off Chien's attacks. Chien realizes that his Snake-style fighting is no match for the style practiced by the stranger, and thus creates a new style from watching his pet cat kill a cobra.Later on the Eagle Claw conspirators track down Pai (when he was about to meet his only remaining colleague Master Chao Chi-Chih (Fung Hak-On), who had already been killed by the Eagle clan), who manages to kill Su Chen. He returns to Chien for hiding, but it is then shown that Ah-Wu is also an Eagle Claw conspirator as he puts poison into their tea. Chien rushes to fetch Sheng Kuan, but sensing danger, Pai flees, with his enemy in pursuit. As Chien hurries after them, he finally learns the truth behind the conspiracy (when Chien is confronted by the missionary who reveals the truth), and eventually challenges Sheng Kuan to single combat after Pai is brought down.Apparently at a disadvantage in the initial phase, Chien brings his new 'Cat Claw' technique-against which Sheng Kuan knows no defense-to bear, killing him. When Ah-Wu shows up after the fight and reveals his true allegiance, Chien and Pai trick and slay him, as they have by chance avoided ingesting the poison (Chien changed the tea before serving it, as it was too hot). Afterwards, the two friends wander off to refine Chien's new technique, giving it its titular name.