In the spirit realm, Oogway fights against his old comrade turned adversary, Kai, a spirit warrior yak, who has defeated all the other kung fu masters in the realm and taken their chi. Oogway gets trapped and has his chi stolen, but not before he warns Kai that the Dragon Warrior will stop him. Kai takes this as a challenge to steal the Dragon Warrior's chi and returns to the mortal realm. Meanwhile, Master Shifu announces his retirement from teaching and passes the role of teacher to the Dragon Warrior, Po, who realizes that teaching kung fu is not as easy as anticipated, and injures the Furious Five. Po is crushed because of his failure, but Shifu advises Po that instead of trying to be like him, he should try to be himself. Po returns home where he meets a panda, Li Shan, who they both realize is his long-lost biological father. They quickly bond with each other, much to the jealousy of Po's adoptive father Mr. Ping.
After introducing Li to Shifu and his friends, Po and the Five defend the Valley of Peace from jade zombies that Kai has created from the chi of past kung fu masters. The team learns through research that Oogway and Kai were once brothers-in-arms and very close friends. After Oogway was injured in battle, Kai carried him to a village of pandas who healed him with their mastery of chi. The pandas then taught Oogway how to utilize chi to help others. However, Kai wanted the power for himself and tried to steal the pandas' chi, forcing Oogway to banish him to the spirit realm by ending his life. In order to defeat Kai, Po must learn to master the use of chi himself. Li offers to teach him by taking him to his secret panda village. While Shifu and the Furious Five stay behind to deal with Kai, Po and Li travel to the village. Although Po is eager to learn chi, Li tells him he must first learn the relaxed life of a panda in the village.
Kai takes the chi of every kung fu master in China, including Shifu and the Furious Five, except Tigress, who escapes the subsequent destruction of the Jade Palace to warn Po and the other pandas that Kai is coming. Afraid, Li and the pandas prepare to run away. When Po begs Li to teach him the secret chi technique, Li confesses that he lied about knowing it out of fear of losing him again. Heartbroken and enraged, Po walks away and isolates himself to train vigorously in preparation for fighting Kai. Mr. Ping, who realizes Po has become happier with Li in his life, tells Li that Po being mad at him is part of being a parent, but that Po will forgive him. Ping then tells him that Po will need both of them in order to stop Kai. Li goes back to Po, and says the pandas will help him fight Kai and his army. Realizing what had previously made him fail as a teacher, Po agrees and teaches them to use their everyday activities as kung fu skills.
Kai arrives and sends his minions to capture Po, who sets the pandas, Ping, and Tigress upon them, distracting Kai. They defeat the jade zombie army, but when Po tries to use his signature Wuxi Finger Hold on Kai to send him back to the spirit realm, Kai reveals that it only works on mortals, not a spirit warrior like himself. Kai then attacks Po who stayed on the defensive until he gains the upper hand in their fight, but Po uses the Wuxi Finger Hold on himself while gripping Kai around the neck, transporting them both to the spirit realm. They fight again, and Kai subdues Po and begins to steal his chi. Using what they learned from Po, his friends and family use their chi to empower him. Po breaks free and harnesses their chi to create a giant dragon figure with which he quickly overpowers Kai. After taunting Kai, Po then gives him the power which overwhelms him, destroying and defeating him and restoring all of the fallen masters and the Five to normal.
In an ethereal golden pond, Oogway appears to Po and informs him that his journey as the Dragon Warrior has come full circle, declaring Po to be his successor. Po chooses to return to the mortal world, and he and his extended family all return to the valley, where they continue practicing kung fu and chi.
Jack Black as Po.
Bryan Cranston as Li Shan.
Dustin Hoffman as Master Shifu.
Angelina Jolie as Master Tigress.
J. K. Simmons as Kai.
Seth Rogen as Master Mantis.
Lucy Liu as Master Viper.
David Cross as Master Crane.
Kate Hudson as Mei Mei.
James Hong as Mr. Ping.
Randall Duk Kim as Grand Master Oogway.
Jackie Chan as Master Monkey.
Steele Gagnon as Bao
Barbara Dirikson as Grandma Panda.
Jean-Claude Van Damme as Master Croc.
Fred Tatasciore as Master Bear.
Alexander Basile as Master Chicken.
Wayne Knight as Big Fun, Hom-Lee.
Al Roker as Dim.
Willie Geist as Sum.
Pax Jolie-Pitt as Yoo.
Knox Jolie-Pitt as Ku Ku.
Zahara Jolie-Pitt as Meng Meng.
Shiloh Jolie-Pitt as Shuai Shuai.
Liam Knight as Lei Lei.
Ming Tsai as Ming.
Mike Mitchell as Male Palace Goose,
Kelly Cooney as Female Palace Goose.
Mick Wingert as the Goose and Rabbit farmers
the third installment in the Kung Fu Panda franchise and the sequel to Kung Fu Panda 2 (2011).