|Battle between Shifu and Tai Lung|
|Tai Lung and Shifu battle above the Jade Palace|
|“|| Shifu: This battle is between you and me.|
Tai Lung: So, that is how it's going to be.
Shifu: That is how it must be.
|—The beginning of the battle, Kung Fu Panda|
The battle between Shifu and Tai Lung was both the physical and emotional confrontation between master and student. It marks as one of two battles involved in the battle of the Valley of Peace, taking place in the Jade Palace within the Valley itself.
After the Furious Five returned to the Jade Palace defeated, Shifu decided that it was time for Po to receive the Dragon Scroll. To their astonishment, the scroll was revealed to be blank. Left with no other choice, Shifu ordered Po and the Five to evacuate the Valley to protect them from Tai Lung's rampage, while giving Po the scroll to take with him. In the meantime, Shifu would remain at the Jade Palace to confront Tai Lung in a fight to the death, knowing full well that he would most likely die. Deeply saddened, his students bowed to Shifu one last time and departed.
By the time Tai Lung finally arrived at the Jade Palace, the whole Valley had been evacuated, leaving only Shifu left to confront him at the palace steps. Tai Lung greeted his former master, but Shifu coolly made it clear that the snow leopard was no longer welcome at the palace. In response to this, Tai Lung mockingly inquired as to the whereabouts of Po, and Shifu replied that the battle was between him and Tai Lung and prepared for combat.
Outraged, Tai Lung finally attacked, leaping into the air and attempting to slam down on Shifu, who quickly dodged as the snow leopard smashed the stairs upon landing. Tai Lung then sent a large piece of the entrance steps flying at Shifu, which he broke apart in a flash of green light. While Shifu was distracted, Tai Lung gave him a punch that sent him flying back into the Hall of Warriors.
Storming inside after him, Tai Lung finally unleashed his wounded pride felt at his original "rejection", shouting that he had rotted in jail for twenty years because of Shifu's weakness. Shifu retorted that obeying your master was not weakness. The following flashback revealed that when Oogway had denied Tai Lung the title of Dragon Warrior, Shifu had done nothing to defend him. When Shifu insisted that Tai Lung not being chosen wasn't his fault and remained on the defensive, Tai Lung began flinging weapon after weapon at him, continuing to scream accusations that it was him[Shifu] who filled his head with dreams and drove him to train until his bones cracked, and even after all that hard work, Shifu still denied him his destiny. Shifu tried to reason that it was never his decision to make, but Tai Lung eventually came across Oogway's staff. Realizing that the old tortoise was dead, Tai Lung took the staff and proceeded to use it as a weapon, telling Shifu that it was his decision now. Outraged that Tai Lung had touched the sacred artifact, Shifu finally went on the offensive, attacking Tai Lung until the leopard used the staff to pin Shifu to the floor by the throat. He demanded that Shifu give him the scroll, but Shifu declared that he would rather die. At that, Tai Lung attempted to choke Shifu with the staff, but it snapped in half under the intense pressure.
Momentarily distracted at the sight of his master's staff destroyed, Shifu barely had time to resist a sucker-kick from Tai Lung, who then pursued the old master as they jumped from pillar to pillar. They eventually burst through the roof, and as they battled in mid-air, Shifu gained the upper hand for a moment, but then Tai Lung grabbed his neck and Shifu took the worst of the impact as they crashed back through the roof. Tai Lung then kicked him into a pillar while he himself knocked into a lantern, setting part of the floor alight in blue flames.
Holding some of the fire in his paws, Tai Lung attacked Shifu once more and demanded to be told how proud Shifu was of him as he fought his former master, his constant punches having the affect of a battering ram against Shifu, weakening his defense and not allowing the red panda the chance to so much as block his attacks. With a double-fisted punch, he gave Shifu a powerful blow, sending him flying onto the steps in front of the Moon Pool.
- “I have always been proud of you. From the first moment, I've been proud of you. And it was my pride that blinded me. I loved you too much to see what you were becoming. What I was turning you into.”
- —Shifu apologizing
It was with that last disabling blow that Shifu finally cracked, telling Tai Lung that he had always been proud of him. Too proud, in fact, that his pride blinded him to what Tai Lung was becoming before it was too late. Shifu offered a sincere and heartfelt apology, hoping that Tai Lung would stop his quest for the ultimate power that wasn't his to start with and redeem himself. Tai Lung hesitated, seeing that Shifu did still love him and was proud of what he had been, but refusing to accept defeat and the reality that he may not actually be the Dragon Warrior he ultimately hardened his heart once more.
He grabbed Shifu by the throat and lifted him into the air, declaring that he didn't want his apology—he still wanted "his" scroll. Looking up, he saw that the Dragon Scroll was missing. Furious, he slammed Shifu into the floor and demanded the scroll's location. While gasping for breath, Shifu told him that the Dragon Warrior would have taken the scroll halfway across China by now, and that Tai Lung would never get the scroll, but at that point began to pass out. Enraged, Tai Lung prepared his coup de grace against his former master with his claws, but was suddenly interrupted by a shout from the entrance coming from a panda holding the Dragon Scroll.