Captain Nemo's submarine, Nautilus, comes to the rescue of several drowning passengers, bringing them to an extraordinary underwater city called Templemer. Once there, they are told that they will remain imprisoned beneath the ocean permanently. The group of survivors includes noteworthy characters such as the thieving brothers Barnaby and Swallow Bath, the cowardly Lomax, Helena Beckett and her son, along with Senator Robert Fraser.
Captain Nemo, played by Robert Ryan, gives the newcomers a tour of the city using scuba gear, revealing a fascinating and somewhat eerie underwater metropolis. During the tour, Lomax tries to steal diving equipment and escape, but he is quickly caught by Nemo's crew. Meanwhile, Fraser appears captivated by a musical performance given by the city's talented swimming teacher, Mala. This performance piques the interest of Joab, Nemo's second-in-command, who notices Fraser's fascination.
The story delves deeper as Joab shows the group how the city produces oxygen and fresh water, alongside an unusual by-product—gold—which is discarded carelessly. Joab warns that nobody has ever successfully escaped from Templemer, hinting at the city's inescapable nature. Despite this, Lomax attempts a daring escape by trying to rupture the city’s dome using the oxygen generator, but his plan backfires — flooding the control room and tragically killing himself.
In another act of rebellion, the Bath brothers sneak into a restricted area of the city and discover a second submarine, called Nautilus II. Seeing it as their chance for freedom, they convince Fraser to help them steal the vessel. Fraser quickly learns how to operate the submarine, and during their escape, they accidentally ram and kill a huge creature called Mobula, a manta ray-like beast that was unintentionally created during the city’s construction.
Fraser then confesses to Nemo that he is trying to prevent the supply of weapons to the American Civil War, reflecting his political motivations. Nemo, in turn, offers Fraser a position within the city, which causes tension with Joab. When the Bath brothers, along with Fraser, steal Nautilus II, Nemo attempts to pursue them, leading to an exciting chase. Nemo warns Fraser that there’s a problem with the engines that could cause an explosion, but Fraser persists in trying to escape.
The pursuit ends violently when Nautilus II, running at crash speed, is overwhelmed by an accident. The ship strikes a reef and comes to a halt while still submerged. As the crew attempts to evacuate through flooded compartments, Barnaby panics and tragically drowns. The larger Nautilus, commanded by Nemo, approaches the wreck just in time to see it explode amid violent turbulence. During this chaos, Joab is electrocuted and confesses to Nemo that he helped Fraser escape, revealing his betrayal. Helena Beckett admits she was aware of Fraser's plan, but she and her son decide to stay in Templemer.
Mala reads aloud a farewell letter from Fraser, in which he thanks Nemo for offering him a place in the city’s future but refuses to stay because he believes in a peaceful, slow approach to political change, even if it is more painful. The film concludes with the Nautilus turning away from the wreckage and heading back to Templemer. On the surface, two men are seen being rescued by a small schooner in the middle of the ocean, far from land or any wreckage. It is revealed that Fraser and Swallow Bath, who is secretly hiding a gold ladle under his coat, are taken aboard, sharing a knowing, somewhat remorseful smile as Fraser tosses the gold ladle into the sea, symbolizing perhaps the rejection of greed or their past actions.
