In the realm of K'un-Lun, Iron Fist completes a display of his martial-arts skills under the watch of Yu-Ti and the Dragon-Kings. Iron Fist requests that he be able to undergo the 'Challenge of the One'. Before he does so, Yu-Ti requests for Iron Fist to reflect on his past.
Ten years ago, business man Wendell Rand embarked on an expedition to find the mythical city of K'un-Lun accompanied by his wife (Heather Rand), his business partner (Harold Meachum) and his 9 year old son (Daniel Rand, the future Iron Fist).
While searching for K'un-Lun in the Himalayas, which only appears on Earth once every 10 years, an accident befalls the party. While crossing a gorge, Danny slips over the edge of a cliff, pulling his mother behind him. Wendell manages to save the two by lowering them to a nearby ledge, but ends up dangling over the side of the cliff himself. He turns to Meachum for help, but Meachum stamps on his hand, causing Wendell to let go, and thus fall to his death.
Meachum reveals that no-one will be able to prove it, and that he is now the head of Rand-Meachum Inc. He claims that he did it all for the love of Heather, and offers to rescue the two stranded on the ledge, but leaves them there to die when Heather refuses his help.
Returning to the present, Yu-Ti agrees to subject Iron Fist to the Challenge of the One, in which Iron Fist has to fight a being called Shu-Hu. The battle begins and, finding himself outmatched, Iron Fist reflects further on the past.
After Meachum leave Heather and Danny for dead, the pair begin to hike out of the mountains. They soon come across a bridge, but are attacked by a pack of wolves. Heather sacrifices herself to the wolves to allow Danny to cross the bridge, which leads him K'un-Lun. We then return to the present, where Iron Fist still battles on.
Spurned onward by his memories, Danny channels the power of the Iron Fist, punching and destroying Shu-Hu, who is revealed to be a robot. Having completed the challenge, Yu-Ti offers Iron Fist the choice of immortality, or death.