Former US Army Captain Nathan Algren, a bitter alcoholic traumatized by the atrocities he committed during the American Indian Wars, is approached by his former commanding officer Colonel Bagley to train the newly formed Imperial Japanese Army for Japanese businessman Omura, who intends to use the army to suppress a samurai-headed rebellion against Japan’s new Emperor. Despite his hatred of Bagley for his role in the Indian Wars, an impoverished Algren takes the job for the money, and is accompanied to Japan by his old friend Sergeant Zebulon Gant. Upon arriving, Algren meets Simon Graham, a British translator knowledgeable about the Samurai.
Algren finds the Imperial soldiers are poorly trained; rather than finding an eager army, he finds conscripted peasants that have no knowledge of firearms. During training, Algren is informed that the samurai are attacking one of Omura’s railroads; Omura sends the army there, despite his protests. The battle is a disaster; the conscripts panic, and Gant is killed in the battle. Algren kills at least eight samurai before he is surrounded; expecting to die, he is surprised when samurai leader Katsumoto decides to spare him. Algren is taken to Katsumoto’s village to live among his family. While he is poorly treated by the samurai at first, he eventually gains their respect. Algren overcomes his alcoholism and guilt over his past sins, learns the Japanese language and culture, and develops sympathy for the Samurai, who are angry that the spread of modern technology has eroded traditional feudalism and the status and power of the Samurai. Algren becomes close with Taka, Katsumoto’s sister and the widow of a Samurai Algren killed.
One night, as the village is watching a kabuki play, a group of ninja, sent by Omura, infiltrate the village and attempt to assassinate Katsumoto. However, Algren notices them and warns Katsumoto in time, saving his life. In the ensuing battle, Algren helps defend Katsumoto’s family, earning his respect. Katsumoto requests a meeting with Emperor Meiji and is given safe passage to Tokyo, bringing Algren along with the intent to release him. Upon arriving in Tokyo, Algren finds the Imperial Army is now a well-trained and equipped fighting force, while Katsumoto, to his dismay, discovers that the Emperor is essentially a puppet of Omura. At a government meeting, Omura orders Katsumoto’s arrest for carrying a sword in public and asks him to commit seppuku to redeem his honor. When Algren refuses Omura’s offer to lead the new army to crush the rebels, Omura orders him killed as well. Omura sends assassins to kill Algren, but Algren kills his assailants. Algren and Katsumoto’s samurai arrive to free Katsumoto from the Imperial Army. They manage to rescue him; however, in the process, Katsumoto’s son, Nobutada, is wounded, and he sacrifices himself to allow the others to escape.