Gichin Funakoshi was a student of Anko Itosu and Yasutsune Azato. Funakoshi is generally credited with having introduced karate to Japan. Funakoshi worked specifically to introduce modernizations into karate and to spread it to Japan. However, there were many other Okinawan karate men living and teaching in Japan during this time period. Funakoshi's peers included such notable figures as Kenwa Mabuni, Miyagi Chojun, Choshin Chibana, Motobu Choki, Kyan Chotoku, Kentsu Yabu, Hironori Ohtsuka and several others.

Funakoshi was responsible for changing the kanji used for writing the name of the art around 1933. from: ??, pronounced “karate”, “Chinese hand” or “Tang fist”, to: ??, also pronounced “karate”, “Empty hand”. He did this to get karate accepted by the Japanese Budo organization Dai Nippon Butokukai. Like most martial arts practiced in Japan, karate made its transition from -jutsu to -do around the beginning of the 20th century. The "do" in "karate-do" sets it apart from karate "jutsu", much as aikido is distinguished from aikijutsu, judo from jujutsu and so on. The name change also served to familiarize a foreign tradition during a time of fervent Japanese nationalism. Japan was occupying China at the time, and Funakoshi knew that the art of Tang/China hand would not be accepted; thus the change to 'way of the empty hand.' The "do" suffix implies that karatedo is a path to self knowledge, not just a study of the technical aspects of fighting.

In addition to changing the way the name of the art was written, Funakoshi also changed the names of many of the kata. The 5 Itosu Pinan forms became known as Heian; the 3 Naihanchi forms became known as Tekki; Seisan as Hangetsu; Chinto as Gankaku; Wanshu as Enpi; etc. These were mostly just name changes, rather than changes to the content of the forms (though content was later changed by others); the changes may have been designed to make the art sound more Japanese (less "foreign"). Funakoshi had trained in both of the popular styles of Okinawan karate of the time, Shorin-ryu and Shorei-ryu. In Japan he was influenced by kendo, incorporating some ideas about distancing and timing into his style. He always referred to what he taught as simply "karate"; however, in 1936 he built the Shotokan dojo in Tokyo, and the style of karate he formulated is called Shotokan.

The modernization and systemization of karate in Japan also included the adoption of the white uniform which is called a “gi” and colored belt ranks. Both of these innovations were originated and popularized by Jigoro Kano, the founder of Judo, one of the men Funakoshi consulted in his efforts to 'modernize' karate. Ranking systems and their values differ greatly from organization to organization, which sometimes leads to confusion when trying to determine a relative standard for karate training and credibility. Photos of early Okinawan practitioners show the masters in the street clothes of the day, or sometimes in briefs. A student trained under a teacher for years, without any sort of tangible advancement.

Classes often begin and end with brief periods of sitting in seiza and practicing meditation. Also, the repetition of precise, dynamic movements, coupled with synchronized breathing as in forms (kata), is considered by some to be consistent with Zen meditation in its aims to maximize a student's composure, awareness, and physical presence (speed and power), while under stress. It is often referred to as a form of "moving Zen" or moving meditation.

Karate was introduced into Japanese high schools before World War II, as it had been to Okinawan schools at the beginning of the century. It was seen as an asset for building strong, able young men who would soon be serving their country. Many universities initiated karate club programs, which bred a notoriously violent and competitive setting. In such clubs, seniors brutalized the junior students, in some cases inflicted vicious beatings as a final 'rite' for those who chose to leave. Many of the distinguishing traits of "traditional" karate thought by Westerners to be "traditional" in fact originate from these clubs, and have little or no relationship to the teachings of those who initiated the martial arts. Styles like Shotokan, Goju-ryu, Wado-ryu, Shito-ryu, Kushin-ryu, and Shindo Jinen Ryu are labelled as 'traditional' because they were founded during the early part of the 20th century. The much misused catch-phrase of "Osu!" used in many dojos came directly from the club at Takushoku University as a product of Japanese military and youth culture. The word has no meaning or significance within the Japanese language itself, but in Western dojo it has the meaning of a respectful greeting or reply.