An American Army Major goes AWOL to Hong Kong for an outlawed martial arts contest called the Kumite.

After thief Alex Cardo gets caught while stealing an ancient katana in East Asia, he soon finds himself imprisoned and beaten up by the crowd there. One of the guards, Demon, feels upset by Alex appearance and tortures him as often as he gets the opportunity. Alex finds a friend and mentor in the jailhouse, Master Sun, who teaches him a superior fighting style called Iron Hand. When a 'best of the best kumite' is to take place, Demon gets an invitation. Now Master Sun and Alex need to find a way to let Alex take part in the kumite too.

Bloodsport III brings us back to the world of Alex Cardo. This time he must battle in a fight to end all fights - The Kumite, the most vicious warrior alive - Beast. He must not only battle for his own honor, but also avenge the death of Sun, his mentor, teacher, and spiritual "father", when Sun is spitefully killed by crime boss Duvalier. In order to defeat Beast, destroy Duvalier, and avenge Sun's death, Alex turns to Leung to whom he was indebted in Bloodsport II. Leung directs him to the great shaman, Makato "the Judge", to whom Alex must turn for guidance. The judge teaches him to fully channel the energy in his mind and body in order to rout the Beast in the Kumite...

Agent John Keller goes undercover into the tough prison known as Fuego Penal to find out about the corpses of prisoners disappearing without a trace. There he gets involved in a dangerous tournament arranged by a man named Justin Caesar, where the prisoners are forced fight to death.