Billy becomes the new Dragon Master of the Dragon Dojo and meets his twin brother, Jimmy. When Jimmy goes missing, Billy calls upon his Dragon birthmark to lead him to his brother. Billy then faces off against the Shadow Boss and discovers that he is none other than Jimmy.

The Shadow Master appears for the first time and orders Jimmy to retrieve his twin brother and the Dragon Sword. Jimmy kidnaps Billy, but fails to retrieve his sword. The Shadow Master then attempts to get rid of both the brothers, but the brothers escape and Jimmy changes sides, joining Billy. Billy and Jimmy become the Double Dragons and face off against the Shadow Master at the EMF plant.

Billy and Jimmy meet a powerful chi master named Su Lien and her sumo wrestler student named Tsunami. Su Lien is then duped into helping the Shadow Master reform his evil ways. When the Shadow Master hooks Su Lien up to a virtual reality machine so that he can drain her mind and steal her powers, Tsunami and the Lee brothers team up to rescue her.

The Shadow Master begins distributing a drug called Oblivion so that he can turn Metro City's population into mindless zombies. The Lee brothers then meet a retired special forces member named Colonel McReady after he is run off the road by a couple of drugged-up drivers, and together, the three team up to stop the Shadow Master and destroy his drug factory

The Shadow Master begins operating an illegal fighting ring in a secluded area of Metro City. Sickle then forces a homeless martial artist named Vortex to fight in the tournament by holding a group of homeless children hostage. Billy and Jimmy must rescue the children and help Vortex before the Shadow Master can get rid of them.