Ralph Macchio's character was supposed to have a romantic relationship with the character of Jessica (played by Robyn Lively) but he asked to have their relationship be platonic because he didn't want his wife to be jealous. In addition, the age difference was uncomfortable for all involved. As Macchio was 27 during filming and Lively a minor at just 16.
While filming, Sean Kanan performed his own stunts, including one wherein he lunged forward and landed on his stomach for 20 takes. After taking aspirin for four days to deal with the residual pain, Kanan fell unconscious. At a hospital, he was diagnosed with internal bleeding caused by a torn abdominal wall.
In the original script Daniel's mother was never mentioned or seen in the movie. It was Ralph Macchio's idea they have a scene of Daniel having a telephone conversation with his mother
explaining her absence that Daniel's mother went to New Jersey to take care of a sick uncle.
After answering an open casting call for The Karate Kid Part III, Sean Kanan was called back for a screen test with Ralph Macchio. "I wanted them to remember me," said Kanan. "So I backed Macchio into a corner and wouldn't let up."
The house where Terry lives is actually the Ennis House, a home designed by Frank Lloyd Wright in 1924. The house has been used in multiple films, but most notably as the original "House on Haunted Hill (1959)," but also in Blade Runner (1982) and Grand Canyon (1991).