The Sign of the Four begins at the Baker Street home of the infamous detective, Sherlock Holmes, and his assistant, Dr. John Watson. Holmes is a little bored, having no case to work on, and is injecting himself with cocaine—Watson disapproves of this bad habit.
Soon enough, the beautiful Miss Mary Morstan arrives at the flat asking for Holmes’ help. She outlines her case. Her father, Captain Morstan, had been an officer in the British Army and was stationed in India; she was at boarding school in Scotland. Ten years ago, he came back on leave, but as soon as he arrived in London he disappeared without a trace. A few years ago, she started receiving pearls in the mail once a year after answering an advert in the paper calling for her address. The pearl she has recently received came with a note, instructing her to go to the Lyceum Theater in London’s West End that evening, where somebody will come to meet her. Holmes and Watson agree to accompany her. Throughout Miss Morstan’s story, Watson can’t help but admire her.
Later that evening, Holmes, Watson and Miss Morstan head to the meeting point. On their way, Miss Morstan shows Holmes a paper she found in her father’s desk. It appears to be a map, with a red cross drawn on it. Beside the cross, the paper reads: “the sign of the four – Jonathan Small, Mahomet Singh, Abdullah Khan, Dost Akbar.” At the Lyceum Theater a carriage is waiting for them and takes them to the house of the anxious Thaddeus Sholto, the son of Major Sholto, who was Captain Morstan’s friend and colleague in India. Thaddeus explains that Captain Morstan is dead; he died from a heart attack when arguing with Major Sholto about the Agra treasure. Thaddeus explains that this treasure, part of which he says is rightfully is Miss Morstan’s, is an immense collection of jewels. His father fell ill a few years previously after receiving a letter from India that caused him a great shock. Thaddeus notes that his father had a fear of men with wooden legs. On his deathbed, Major Sholto was about to reveal the location of the Agra treasure when a bearded man appeared at the window; the shock killed Major Sholto. The next day, Thaddeus and his brother, Bartholomew, discovered that Sholto’s belongings had been searched and a note reading “the sign of the four” was left on the body. Just before he died, Major Sholto instructed his sons to share some of the treasure with Miss Morstan and gave them pearls to send to her. Thaddeus then informs his visitors that Bartholomew has located the treasure at the family home, Pondicherry Lodge; all they need to do now is head over there and divide it up.
When the group arrives at Pondicherry Lodge, they find the housekeeper, Mrs. Bernstone, in an agitated state. She says that Bartholomew has not left his attic laboratory all day. Holmes and Watson look through the keyhole and see Bartholomew’s face grinning back at them, unnaturally still. They break in and confirm that Bartholomew is dead; he seems to have been killed by a poisonous blow dart. Holmes investigates the scene, concluding that the assailants are a wooden-legged man and a short accomplice. The treasure, too, is nowhere to be seen. Holmes suspects the main culprit to be Jonathan Small, one of the “sign of the four” signatories. As Athelney Jones, the hapless Scotland Yard detective, arrives, Holmes sends Watson to fetch Toby the hound so that they can track a scent from the scene—it appears that the wooden-legged man stepped in creosote in his rush to escape. Watson drops Miss Morstan at home on his way, feeling his affections towards her increasing.
Holmes and Watson trek around London, following Toby the hound. At one point, the dog leads them to a pub’s creosote store, much to their amusement. Toby then picks up the original scent again and leads them to the Thames. Holmes talks to a local woman and gleans that the criminals must have hired a boat from Mordecai Smith called the Aurora—a speedy steam launcher. He tricks her into giving a description of the boat.
In order to trace the vessel, Holmes hires a group of street urchins to search London. They have no luck, so Holmes, increasingly agitated at the lack of progress, disguises himself as a sailor and makes his own inquiries around London. When he has a breakthrough, he instructs Athelney Jones to meet him at his flat. Jones waits for Holmes in Watson’s company, before the two are interrupted by an old man who claims to know the solution to the case. The old man is only willing to speak to Holmes and makes to leave when he learns that Holmes is elsewhere; Jones and Watson entrap him in the flat. Suddenly, the old man reveals himself to be the delighted Holmes in disguise. Holmes explains that he has tracked the Aurora down to a shipyard, where it awaits Jonathan Small and his accomplice, who will attempt to escape that evening with the help of Mordecai Smith.
Later that night, Holmes, Watson, Jones and some police officers board a police boat in order to give chase to the Aurora. Holmes has stationed a boy at the shipyard who will give a signal when the Aurora is leaving. Soon enough, Small and his accomplice, Tonga, attempt to escape with Mordecai Smith at the helm. Holmes and the others begin the chase; when Tonga, a small “black cannibal,” prepares to shoot at them with a blow dart, Holmes and Watson fire the guns at him. Tonga, dead, falls into the river. The Aurora runs aground and Jonathan Small is captured. The Agra treasure appears to have been recovered, so Watson delivers the treasure chest to Miss Morstan, only for them to discover that it is empty. Watson is relieved because he feels that Miss Morstan’s riches would have made her inaccessible to him. Miss Morstan is not upset about the treasure, and they embrace.
Jonathan Small is taken back to Baker Street and asked to tell his story at Holmes’ request. Before he does so, he explains that he has scattered the treasure in the Thames; if he can’t have it, he doesn’t want anyone else to. Small then tells his story. He was stationed in India with the British Army. Soon after arriving there, his leg was bitten off by a crocodile. When the Indian Mutiny began (the locals rose up against their British authorities), Small worked as a guard at the ancient fortress of Agra. He was in charge of two men, Mahomet Singh and Abdullah Khan, who convinced him to join with them in seizing treasure from a merchant acting on behalf of an Indian prince. Along with Abdullah’s cousin, these men made up the “sign of the four” and pledged allegiance to each other. They killed the merchant and acquired the treasure, a rich bounty of various jewels. It was then hidden in the Agra fortress to be retrieved when the country had calmed down a little. Though the tensions did die down soon enough, Small and the others were arrested for killing the merchant and subsequently sent to a prison camp on the Andaman Islands. At the prison camp, Small made the acquaintance of the overseers Major Sholto and Captain Morstan, and hatched a plan to share the treasure with them in exchange for his escape. Sholto double-crossed everyone and took the treasure for himself back to England. During this time, Small befriended Tonga, a native of the island, nursing him when he was sick. Tonga became extremely loyal to Small and helped him to escape.
The two men eventually made it back to England, where for a time they survived by displaying Tonga in freak shows. Small tracked down Sholto just before he died and left the note on the Major’s body. He had an inside contact at Pondicherry Lodge who informed him that the treasure had been discovered. With this knowledge, he and Tonga went to the house to get the treasure; Tonga entered the house first, killing Bartholomew without checking with Small first.
Holmes is satisfied he has learned all there is to know about the case. Athelney Jones thanks him for his help and leads Jonathan Small away. Watson informs Holmes that Miss Morstan has agreed to marry him. Rather than offer congratulations, Holmes explains that he believes “love is an emotional thing, and whatever is emotional is opposed to that true cold reason which I place above all things.” Holmes reaches for his own comfort: the cocaine bottle.