The narrative begins in Baker Street, where Sherlock Holmes relies on cocaine to escape the stagnation of ordinary life until a mysterious client, Mary Morstan, arrives. She relates how her father, Captain Morstan, vanished mysteriously in London ten years prior, followed years later by the annual delivery of a single priceless pearl and a recent summons to meet an unknown benefactor. Holmes, Watson, and Miss Morstan keep the appointment and are driven through the London fog to a suburban retreat, where Thaddeus Sholto reveals the dark history of the Agra treasure. Thaddeus explains that his late father, Major Sholto, had discovered the massive fortune alongside Captain Morstan in India, brought it to England, and kept it hidden after Morstan died suddenly during a confrontation.
Moments later, the group travels to Pondicherry Lodge in Upper Norwood to claim their share, only to discover Thaddeus's twin brother, Bartholomew Sholto, murdered in his locked laboratory. He has been killed by a poisoned dart, and the legendary Agra treasure has been stolen. Inspector Athelney Jones arrives and mistakenly arrests Thaddeus, while Holmes embarks on an independent investigation. Using his exceptional powers of observation and deduction, Holmes traces the footprints of a wooden-legged man and a tiny, savage associate, utilizing a mongrel named Toby to follow a trail of creasote down to the Thames.
Holmes deduces that the perpetrators are Jonathan Small, an ex-convict tied to the original theft in India, and Tonga, a violent Andaman Islander. After a series of frustrating setbacks and a thorough search of the riverfront, Holmes tracks down the steam launch Aurora. A frantic and thrilling boat chase down the Thames ensues, ending in the marshes where Tonga is shot dead after attempting to kill his pursuers with a poisoned dart, and Small is captured while sinking hopelessly into the mud.
Brought back to Baker Street, Small confesses to his entire history, explaining how he and his Sikh associates were betrayed by Major Sholto after earning the treasure through twenty years of misery in the Andaman convict settlement. Small reveals that he hurled the priceless gems into the Thames just as the police boat closed in, ensuring that no one else would profit from the fortune. Meanwhile, Watson visits Miss Morstan and, upon discovering that the iron chest is completely empty, confesses his love to her, realizing that the golden barrier separating them has finally vanished.
