Darkwing chases Moliarity to the city of Kung Pow, where he meets his old martial arts instructor, Master Goose Lee. Darkwing never did earn his black belt under the tutoring of his old master. Darkwing is determined to show his mentor how much he's improved and Goose Lee is not very impressed.
Goose Lee has made a lot of money selling his defense videos and plans to build a theme park called "Ninja Land" so he can teach more people about the ninja way. The filming is interrupted by a robbery at a museum and Darkwing leaps into action. He is victorious at first, but overconfident and the ninjas get away.
Gosalyn gets bored and goes into town to find something to do and gets ambushed by ninjas. A little boy named Duck Ling who looks eerily like Honker. They stumble on the ninja hideout and Gosalyn gets captured after they hear about the plan. The ninjas leave and take the artifact with them. Duck Lee breaks Gosalyn out and they go tell Darkwing.
They go and find a giant dragon and then Goose Lee reveals that he was behind the robbery and takes the artifact and places it on the head of the dragon and brings it to life. The dragon is supposed to be under his control, but the baby dragon only wants to play and heads for the city where it creates havoc.
Darkwing comes up with a plan and is able to stop the dragon and earns the respect of his misguided teacher.