The episode begins with a giant palace in China being shown. Inside, the Empress sits on her throne holding an ornamental box on her lap. She rings a gong to summon her nephew, Di Lung, who flies into the palace riding a square wooden skateboard and asks what's up. The Empress, speaking in Mandarin, states that the source of all her power is "checking out". She says something and looks down to her box, which opens up, and from it her "magic silk worm" ascends into the sky as a spirit. The Empress says something while throwing the box to the ground in frustration and Di Lung repeats her in English, stating that her powers are draining away and the people will sense that she is vulnerable. She says something else while walking to a window, and Di Lung explains that the only way to contact the magic silk worm is to use the bones of someone truly innocent. Di Lung then rides off to find such a person.
At the Great Wall of China, we see Courage, Muriel, and Eustace on vacation Di Lung sneakily watches from behind part of the wall. Di Lung starts running and says "Watch where you're going, ya fool" then pushes Courage. Di Lung then offers to be their tour guide and when Muriel asks to go to the upper level Di Lung uses a frog that blows a green bubble and causing Muriel to float into the sky and Di Lung follows her. Eustace ignores the danger caused and Courage uses Di Lung's frog to form a green bubble and Courage gets in it. We then see Muriel chained on the ceiling in the palace and Di Lung is going to take out her bones. Courage arrives at the palace and tells the Empress he doesn't want Muriel to be getting her bones removed. The Empress makes the palace magically spin around and teleport Courage to a village (with the box).
Courage sees the Lady who sells noodles. Courage then decides to have a snack and he hands her the empty box that used to have the magic silk worm in it as payment. Courage's journey begins and his first challenge is facing a Tiger than is about to eat a kid. The noodle seller then told Courage that to defeat the tiger he must enter its jaws. Courage pours noodle soup on himself, drops lettuce on his body, puts a pineapple on his head, and a cherry. The tiger sees Courage covered in food and puts the kid down and says "Yummy, beat it kid"! The tiger bites Courage starts chewing him. The noodle selling lady tells Courage to concentrate on peaceful images. Courage sees an image of Muriel and turns into a purple creamy puddle and gets out of the tiger's jaws and the village people throw the tiger into a cage.
Courage's journey continues. He climbs aboard a carriage and sees some people playing music and starts playing along with them. However, a bunch of poison darts are suddenly fired in their direction and hit a tree and kill it. The music players take cover to protect themselves from the darts. Courage falls off the carriage and uses a piece of glass from a bottle and blocks them, but sees a cliff behind him. Courage loses his small shield and the same noodle selling lady in the form a bird tells Courage to use his enemy's force. Courage uses his enemy's force and the darts hit his teeth and get stuck and Courage uses them as a bridge and spits out of his teeth and crosses over the bridge with darts and into a bamboo forest.
He then sees the palace and it is guarded by a male green, long, dangerous Asian Lung Dragon. The dragon breathes fire and scares Courage. The noodle selling lady in the form of a dragonfly told Courage to use his enemy's force against him. The dragon breathes fire and Courage gathers up all the flames in his mouth and blasts the fire back at the dragon and the dragon disintegrates. The noodle selling lady told Courage he was finished with his lessons and is ready to get his Muriel back.
Courage looks in the lock and sees Di Lung telling Muriel that he is not performing acupuncture, but is actually taking out her bones. Courage gasps and breaks through the door. The Empress fights Courage and Di Lung chains Courage's legs. The Empress shoots lasers out of her eyes and accidentally frees Courage. The Empress shoots laser beams repeatedly until Courage uses a large mirror to deflect the beams back at the Empress, causing her to crumble to pieces. Di Lung and Courage are shocked that the Empress is gone. However, the noodle selling lady returns and reveals she is the Good Empress and came to reclaim the throne. Di Lung puts all of the bones back in Muriel out of fear. The Good Empress tells Courage that he has saved China and now peace and harmony have returned to China and the magic silk worm is alive and well and she puts the worm in the box. Muriel is a bit different with a foot as her hand and a hand as her foot.
Back at the Great Wall of China, we see Eustace getting his legs eaten up by the tiger who then laughs.
- 1st appearance of Evil Empress, Good Empress, Asian Lung Dragon, and Tiger.
- Di Lung is seen once more with Evil Empress in Aqua-Farmer. His line "Yo Aunty, What's up?" is reused again.
- Di Lung's first major appearance is in this episode.
- Di Lung's skateboard is an abacus.
- The title is a reference to the movie Crouching Tiger, Hidden Dragon.
- Di Lung's skate board is made of wood.
- Despite the episode taking place in present time, China appears to be ruled by monarchy (although the monarchy collapsed in 1912 in real life).