Plot

South Boston teenager Jason Tripitikas is a fan of martial arts films and he awakens from a dream of a battle between the Monkey King and celestial soldiers in the clouds. He visits a pawn shop in Chinatown to buy Wuxia DVDs and discovers a golden staff. On his way home, Jason is harassed by some hooligans, who attempt to use him to help them rob the shop-owner Hop. Hop tries to fight the thieves with the staff, but is shot and wounded. He tells Jason to deliver the staff to its rightful owner and Jason flees with the staff. He is cornered on the rooftop by the hooligans and almost shot too, but he is pulled off the roof by the staff and falls backwards onto the asphalt.

When Jason regains consciousness, he finds himself in a village in ancient China, that is under attack by armoured soldiers. The soldiers see his staff and attempt to seize it. He is saved by the inebriated traveling scholar Lu Yan, a supposed "immortal", who remains alert and agile even when drunk. Lu brings Jason to a teahouse and tells him the story of the rivalry between the Monkey King and the Jade Warlord. The Jade Warlord tricked the Monkey King into setting aside his magic staff Ruyi Jingu Bang and transformed him into a stone statue, but the Monkey King cast his staff far away before the transformation. Lu ends the tale with a prophecy about someone, a "Seeker", who will find the staff and free the Monkey King. Just then, they are attacked by the Jade Warlord's men again but manage to escape with the help of Golden Sparrow, a young girl who refers to herself in the third person. She reveals that her family was murdered by the Jade Warlord, against whom she has therefore sworn revenge.

Meanwhile, the Jade Warlord, upon learning that the staff has been sighted, sends the White-Haired Witch Ni-Chang to help him retrieve it in exchange for the elixir of immortality. Jason, Lu Yan and Golden Sparrow meet a strange man dressed in white, who takes the staff away from them. Lu Yan fights with the man (later revealed to be the Silent Monk) for the staff until the latter realizes that Jason is the prophesied Seeker, and he joins them in their quest to free the Monkey King. As the four travel to Five Elements Mountain, Lu Yan and the Silent Monk teach Jason Kungfu along the way. After crossing a desert, they encounter Ni-Chang and her henchmen and a battle ensues, in which Lu Yan is mortally wounded by Ni-Chang's arrow. The protagonists take refuge in a monastery, where they learn that Lu is actually not an immortal, and only the Jade Warlord's elixir can save his life. In desperation, Jason goes to the Warlord's palace alone to exchange the staff for the elixir.

In the palace, the Jade Warlord asks Jason to fight with Ni-Chang to the death, because he had promised to give the elixir to only one of them. Jason is defeated by Ni-Chang and the Warlord taunts him for his foolishness, and is about to decapitate him when the other protagonists and monks from the monastery arrive to join in the battle. Jason manages to grab the elixir and he tosses it to Lu Yan, who drinks it and recovers. The Silent Monk is wounded by the Jade Warlord during the fight and he passes the staff to Jason, who uses it to smash the Monkey King's statue. The Monkey King is freed and the Silent Monk is revealed to be actually one of the Monkey's clones. After another long battle between the Monkey King and the Jade Warlord, the Warlord is eventually stabbed by Jason and falls into a lava pit to his death. However, Golden Sparrow has been seriously injured by the Warlord and she dies in Jason's arms, thanking him in the first person before dying. By then, the Jade Emperor has returned from his meditation and he praises Jason for fulfilling the prophecy before allowing him to return home.

Jason finds himself back in 21st century Boston after passing through a magical portal at the exact moment and location of his earlier fall. He defeats the hooligans easily and drives them away. He alerts the police and calls an ambulance for Hop, who survives from the gunshot wound and secretly reveals to Jason that he is an immortal. Before the film ends, Jason is delighted to see a girl who resembles Golden Sparrow and speaks to her briefly.