The game is set in China hundreds of years ago, where the player character is tasked with protecting half of a magical mask. The wearer of this mask will be granted untold power. The villainous Fang Tu has the other half of the mask, and wants the player character's half.
When asked about the inspiration for the game, Tom Zito, president of Digital Pictures, said that "We asked game players what types of games we should create, and frankly, we were surprised when they kept telling us to make a game that recreates a kung fu movie."
The video footage for Supreme Warrior was filmed on Shaw Brothers Studio sets in Hong Kong. Many of the actors, and even director Guy Norris, had extensive martial arts backgrounds, and the actors playing the game's enemies each choreographed their own fight routines. The game's fight sequences were mostly recorded using a head-mounted minicam worn by a stunt coordinator, while the sequences where the player character is hit were recorded with a padded hand-held camera which the actors would actually punch and kick.