The Palace Arena is an enclosed area within the Jade Palace grounds. It stands shortly in front of the Palace itself — directly atop the grand staircase — and is the main area for special events and showcasing tournaments held by the palace Masters. Surrounding the main square on either side are the spectator stands, parallel to the main entrance gate and a separate viewing platform apparently reserved specially for the Masters.
It was in this arena that the Dragon Warrior Tournament was held in order to decide which of the Furious Five would become the Dragon Warrior. The citizens of the Valley of Peace gathered inside the arena to watch the historic event, except for Po, who had been locked out of the arena because he couldn't reach the top of the stairs in time. The members of the Five performed their Kung Fu to demonstrate their skills, but after landing inside the arena by means of strapping fireworks to a chair, Po was chosen as the Dragon Warrior by Oogway. After this, the audience cheered and there was a celebration made up of music and confetti.
When the Winter Festival arrived, the best chefs in the land gathered in the arena to have Po try out their dishes in order to pick a chef responsible for catering the Jade Palace's formal Winter Feast banquet. However, Po ended up not selecting any of them after accidentally dismissing a rabbit chef and afterwards deciding he would give the job to his father. During this time, the arena was covered in snow and colorful decorations for the holiday.
The arena was the place where Po and the Furious Five gathered as Shifu read a scroll alerting to the threat of Lord Shen and his weapon. After reading the scroll, Shifu sent Po and the Five to Gongmen City to deal with this threat.
- Chinese art provided reference and directly influenced many of the film's designs; the center of the palace arena, for example, displays a Chinese calendar.