Mr. Miyagi travels to Boston to attend a commendation for Japanese-American soldiers who fought in the 442nd Regimental Combat Team during World War II. He meets Louisa Pierce, the widow of his commanding officer, Lieutenant Jack Pierce. At Pierce's home, they catch up on old times and war stories.
Miyagi is introduced to Pierce's granddaughter, Julie, a teenage girl struggling with anger issues due to her parents' deaths in a car accident. Her behavior has led to friction between Julie and her grandmother and her fellow students. She sneaks into the school at night to care for an injured hawk, Angel, which she keeps in a pigeon coop on the roof.
Miyagi invites Louisa to stay at his house in Los Angeles to enjoy peace and quiet tending his garden while he stays in Boston as Julie's caretaker. At school, Julie meets and befriends Eric McGowen, a security guard in training and a pledge for a shady school security fraternity, the Alpha Elite. The members are taught to enforce the school rules, even using physical force, by a self-styled colonel, Dugan. In this group is Ned, who makes repeated unsuccessful sexual advances on Julie. Eric learns of Angel and promises to feed her while Julie is with Miyagi.
When Julie survives almost being hit by a car by jumping into a tiger position, she reveals to Miyagi that she was taught karate by her father, who learned from her grandfather, Miyagi's student. The next time she sneaks into the school to feed her bird, she is detected by the Alpha Elite, and chased through the school. Julie hides in the cafeteria until Ned finds her, at which point she hits a fire alarm with her backpack, causing Ned to let go of her. Escaping the school, she is arrested by the police and gets suspended for two weeks. Miyagi uses this time to take Julie to a Buddhist monastery to teach her the true ways of karate.