Ryo fighting Guizhang in a free battle.

The free battles pit Ryo Hazuki against one or more enemies.

Ryo has a large list of martial arts techniques. The player has the ability to enter practice mode, in which Ryo will practice his various martial art techniques, either alone or with Fuku-san at the Hazuki Dojo. This helps to increase the player's familiarity with the battle system. As Ryo consistently practices his moves, they will become stronger and more effective in free battle. Practicing is essential to do well in free battles. The practice mode was exclusive to the first Shenmue and did not return in Shenmue II.

While progressing through the game, players have the ability to learn more techniques, adding to Ryo's skills and ultimately making him a more powerful martial artist. There are several senior martial artists that Ryo meets throughout his journey, and they offer to teach him new skills. The player has the choice to accept or decline these offers mostly in the first Shenmue, although the final move Swallow Flip is mandatory to learn. Certain moves such as Iron Palm and Counter Elbow Assault are mandatory to master in Shenmue II to progress through the story.

Another method for learning new techniques involves Martial Arts Scrolls. These antique scrolls can be found, or purchased, at various locations in the game. Once Ryo has viewed the scroll in his inventory, the technique will be mastered and added to his skills, but the player will need to practice the key combinations to truly master it.