Ash and his friends encounter a panicking Trainer who has lost control of his Pokémon. The rampaging Tauros charges towards an unsuspecting old man. Before the old man can call on his Pokémon, Ash intervenes and tries to stop Tauros with his Bulbasaur. The man watches intently as Bulbasaur uses Vine Whip to stop Tauros in his tracks, then it puts Tauros to sleep with a follow up with a Sleep Powder. Misty, Brock and Tauros's Trainer joins them. The Trainer thanks Ash for his assistance and recalls his Pokémon. The old man congratulates Ash on training his Bulbasaur very well and escorts them over to an urgent task that needs to be handled.
The elderly man introduces himself as Kenzo and he points the group to his fighting dojo where he is the current Shihan. As they approach the dojo, the gang hears voices from the inside. They ask what is going on, and Kenzo replies that it's his granddaughter's stupid idea of training through dancing. After the door opens, Ash sees a Hitmontop dancing and checks him on his Pokédex. After the training is over, Kenzo's granddaughter Chigusa presents herself, and Kenzo informs her that Ash will be the new Shihan. Ash reacts surprised while Chigusa is angered and she retorts that she must be the new Shihan. Kenzo refuses to pass the title on to Chigusa because he considers her training strategy to not be due to serious, and he claims that she is teaching ballet than fighting. Ash then tries to settle the argument, while Chigusa challenges Ash to a battle which will the decide the future Shihan. Ash replies he doesn't want to be a Shihan and he even doesn't have a Fighting-type Pokémon to battle, but Kenzo intervenes saying he should use Bulbasaur.
As Ash refuses again, an outsider named Shiro, also known as the "Dojo Destroyer", appears at the entryway and challenges the current Shihan to a match. He declares his intentions, to earn enough respect to open his own dojo after already defeating 11 dojos. Kenzo accepts his challenge, while from the rooftop Team Rocket spies on them, planing to steal Chigusa's Hitmontop. Next, the battle is up. Shiro sends Hitmonlee and Kenzo calls out his Machoke, but as it gets out of its Poké Ball both Kenzo and Machoke experience backaches. Chigusa offers to take her grandfather's place, and with the risk of losing their dojo's plaque, Kenzo agrees to the substitution. Brock takes his position as the referee and the battle restarts.
The battle begins with Hitmonlee blocking all Hitmontop's Rolling Kick attacks. Hitmontop then launches a Rapid Spin attempting to use Triple Kick, but Shiro predicts every hit, ordering Himonlee to dodge. Next, Hitmonlee hits his opponent with Double Kick followed by a Jump Kick and a Hi Jump Kick. As Shiro prepares to end the match, Team Rocket shows up releasing smoke onto the field. After the smoke clears, the two Fighting Pokémon are being caught in a net while Team Rocket recites their motto in ninja outfits.
As they are dragged into the balloon, Ash sends Bulbasaur to use Razor Leaf on the net, therefore releasing the Pokémon. Jessie and James reply by sending Arbok and Victreebel respectively. Arbok uses Poison Sting, but Hitmonlee dodges the attack attempting to use Hi Jump Kick. Victreebel counters with Sleep Powder putting Hitmonlee to sleep. Pikachu and Bulbasaur quickly dispose of Arbok and Victreebel, then Bulbasaur's Razor Leaf slices the balloon, which sends Team Rocket blasting off.
Afterwards, Shiro suggests that he and Chigusa should battle tomorrow as both their Pokémon are fatigued due to the intense activity they encountered. The day turns to night and the scene moves to the inside of the dojo where Chigusa expresses feels confident that she'll win the challenge. Kenzo informs her of possible failure if she continues to battle the same way she did today. Then he turns to Ash for assistance, and he agrees to help train Chigusa. To help Chigusa prepare, Ash has his Bulbasaur compete in a practice battle against Hitmontop. Chigusa orders the first attacks, but Bulbasaur evades the onslaught. Then Hitmontop launches into a Rapid Spin and attempts to use Triple Kick, but Ash predicts every hit, ordering Bulbasaur to dodge the attacks. After all the successful dodging, Bulbasaur uses its vines to spin Hitmontop out of control, wrap him and then using Tackle to knock him out. Kenzo declares Ash the winner, and he proceeds to inform his granddaughter of the flaws in her style of battling. Chigusa realizes the mistakes she made and she apologizes to Hitmontop for her focus on how his attacks looked. Hitmontop reassures Chigusa, and the pair set their sights on becoming a stronger team and they proceed to train with Ash and Bulbasaur again.
The next day arrives, and Chigusa's match against Shiro takes place again. Hitmonlee proceeds to use Rolling Kick, but this time Chigusa predicts his attacks and orders Hitmontop to dodge them. Next Hitmonlee uses Double Kick but Hitmontop manages to block his attack. Then, he attempts to use Hi Jump Kick but misses while Hitmontop launches into an improvised upright Rapid Spin attempting to use Triple Kick again. While he misses two times, Hitmontop manages to knock Hitmonlee with a third hit. Chigusa is declared the winner, and she is overjoyed with the result. Shiro is gracious in his defeat and bows to Kenzo as a sign of respect.
Suddenly, Team Rocket makes another unwelcome appearance, this time they show up with a boxing Meowth machine. One of the mecha's hands extends to grab Hitmontop, but Bulbasaur cuts it with Razor Leaf. Then the other hand proceeds to grab Bulbasaur, but Hitmontop kicks the flying glove away with Rapid Spin which sends it back to the machine. Then Pikachu uses Thunderbolt to blast Team Rocket off, destroying the machine as well.
As the sun sets, Ash, Misty, and Brock are saying their goodbyes and heading on their paths once again. Chigusa apologizes to Ash for causing so much trouble, but Ash laughs it off and admits that he enjoyed his time. She then turns her attention to her grandfather and admits that she has a lot to learn. Kenzo declares that he is too old to continue training, but at Chigusa's insistence, he agrees to teach her to become the dojo's next Shihan. Misty is thrilled for Chigusa, as she and friends make a final bow before continuing on their way towards Ecruteak City.