Sherlock Holmes and Dr. Watson notice a strange cane that has been left in their office. They soon meet the owner of the cane, Dr. Mortimer who has come a long way to consult Mr. Holmes on a case. Mortimer had been a longtime friend and doctor of Sir Charles Baskerville, who recently passed away. Although a sudden heart attack had been determined as the official cause of death, Mortimer found it rather mysterious. Sir Charles had died with an expression of horror on his face and a huge footprint of a hound had been found 50 yards from his dead body.
Dr. Mortimer goes on to explain how a supernatural and mystical black hound has plagued the Baskervilles since Hugo Baskerville supposedly sold his soul to the devil during the English Civil War. The lecherous man had kidnapped his neighbor’s daughter and kept her locked away in his estate in Devonshire. However, the girl somehow managed to escape and Hugo rode after her on his horse with his drinking pals behind him. The girl had died of fear and exhaustion but Hugo had been found mauled to death by a demonic hound.
After Sir Charles’ death, his nephew Henry Baskerville is the next of kin to inherit the Baskerville wealth and mansion. Henry has recently traveled to London from Canada after receiving the news of his uncle’s demise and is staying at a hotel nearby. Dr. Mortimer reckons that he might befall the same fate as his uncle and wants Mr. Holmes to further investigate into the matter. Rather intrigued by the odd circumstances, Holmes decides to take the case.
Mr. Holmes and Dr. Watson meet Henry the next day. He has just received an anonymous letter warning him to not return to his home in Baskerville. Henry seems to pay no notion to the letter or the haunted nature of the Baskerville mansion but is quite agitated by the theft of his brown shoes, a pair he had only bought recently. Following the departure of Henry and Mortimer, Holmes and Watson decide to tail them without their knowledge. Holmes discovers a man with a distinct black beard spying on them from a cab but he quickly takes off when he realizes that he’s been spotted.
At Henry’s residence, another old black shoe goes missing. During lunch, Holmes decides that it’s not safe for Henry to be traveling alone and asks Watson to go to the mansion with him while he stays back in London, wrapping up some old cases. Soon after, the brown shoe that had gone missing miraculously reappears, but the other black one remains to be found. Finally, Watson and Henry head off towards the Baskerville Mansion. Before Watson boards the train, Sherlock suggests that he should be wary of anything strange, especially the neighbors, and report everything back to him.
Watson, Henry and Mortimer arrive at Baskerville Hall, an old mansion that looks gloomy and run-down. The inside of the mansion resembles that of royalty complimented by the portraits of the Baskerville ancestry. They find out that a fugitive named Selden is on the run and a state of emergency has been declared. Mortimer leaves the pair and goes back to his abode. Watson wanders around and meets the house butler, Mr. Barrymore and his wife. As Mr. Barrymore notifies Henry of his intentions of quitting soon, along with his wife, since it has become rather depressing to work after the old master’s death, Watson notices a strange resemblance between Mr. Barrymore and the spy they spotted earlier but keeps his suspicions to himself for the time being. Later that night, he prepares to sleep, but the unfamiliar setting keeps him up. Just when he’s about to doze off, his ears catch the relentless sobbing of a woman.
The next day, Watson figures out that sobbing was from none other than Mrs. Barrymore, an idea Mr. Barrymore denies, only furthering Watson’s suspicion of him. As Watson goes on a nearby stroll, he meets a rather peculiar man catching butterflies who turns out to be the next-door neighbor, Jack Stapleton. Before he runs off, they have a brief chat and Jack tells Watson that he’s aware of his relationship with Holmes. A beautiful woman then approaches Watson. She mistakes him for Henry and advises him to return to London right away. However, she immediately changes the subject when Jack returns. It turns out that the woman is Jack’s sister, Beryl Stapleton. Upon realizing her mistake, she refuses to tell Watson anything else.
Beryl and Henry later meet and quickly fall in love, leaving Jack enraged. Beryl wants Henry to disperse before matters get out of hand, but he refuses to do so. Meanwhile, Watson notices that Mr. Barrymore frequently awakes in the middle of the night and lights a candle in an empty room. Watson soon realizes that the light is to notify someone outside. When confronted, Mrs. Barrymore tells Henry that she’s the sister of the escaped convict, Selden and they’ve been providing him with food and clothing. That night, Watson spots another unknown person quietly overseeing everything from a distance.
Later that night, Henry agrees to allow Selden to flee the country and Mr. Barrymore gives him a partially burnt letter, asking Sir Charles to be outside in the period of time coinciding with the time of his death. The letter was signed with the initials L.L. This leads Mortimer to suggest that Watson should talk to Laura Lyons who lives nearby. Upon further inquiry, she admits to Watson that it was indeed her who had written the letter. She had asked Sir Charles to help her finance her divorce but later canceled her appointment because someone else had offered her the money. However, she refuses to name the other person which leads to Watson adding her to the list of suspects.
Watson further investigates the stranger he had seen the other night. He shares a couple of drinks with a man called Frankland. He tells Watson that he’d seen a child carrying food and water to a stranger along the rural side. Watson trails the kid only to find that the unknown stranger is none-other-than Sherlock Holmes himself. Watson feels betrayed but Holmes assures him that his observations were dependent on secrecy. Once together, Holmes informs Watson that the Stapletons, who have been pretending to be siblings, are, in fact, married. They assume Jack had been the spy from London and Beryl had sent the letter to Henry.
The screams of a man nearby startle the gang as well as the freakish and horrifying groan of what could only be a hound. Rushing towards the man, they discover only the corpse of the man who had fallen to his death earlier. It looks like Henry from afar. However, it turns out that the body belongs to Selden, who had been wearing Henry’s old clothes. He had been fleeing from something and had fallen from the cliff in the process. Jack arrives soon after and seems rather confused to find Selden’s dead body. Holmes accompanies Watson to Baskerville Hall and has dinner with Henry. Afterward, he notices a portrait of Hugo Baskerville and acknowledges the striking resemblance that Jack and Hugo share.
Our gang then visits Laura and tells her that Jack is married and had only been leading her on. She confesses that Jack himself had dictated the letter and that she was bullied into lying about the night of Sir Charles’ death. Holmes summons inspector Lestrade from London. That night, he convinces Henry to join the Stapletons for dinner. Henry, although unsure at first, decides to do so anyway.
As Henry joins Jack for dinner, Beryl is nowhere to be seen. When, Henry finally leaves, Watson and Holmes, accompanied by inspector Lestrade, follow closely through the thick fog. Out-of-nowhere, a savage hound with flames coming out of its mouth jumps on Henry. The trio is able to kill the vicious hound with several shots before it rips out Henry’s throat. Holmes studies the corpse to find that it’s nothing but a mortal hound whose mouth has been lined with phosphorous to give it an illusion of flames. Back at the Stapleton residence, Beryl is found tied-up and gagged. She tells them everything including her husband’s escape plan through Grimpen Mire, a passageway filled with quicksand.
The next morning, they find Henry’s old boot there but no sign of Jack. The boot had been used to give the hound Henry’s scent and Selden had suffered a horrible fate due to wearing his old clothes. Jack is assumed dead trying to traverse through the quicksand. Back in London, Holmes explains to Watson that Jack was the son of Sir Charles’ youngest brother who had long ago moved to South America and his actual name was Rodger Baskerville. He had constructed an evil plan based on the old lore of the demonic hound in order to inherit the entire Baskerville fortune. Another mystery solved, Holmes and Watson once again return to Baker Street.