In the stark surroundings of Stalag 17's Compound 4, 630 American airmen, all sergeants, find themselves enduring the strict oversight of Oberst von Scherbach, their no-nonsense camp commander. As Christmas draws near in December 1944, the inmates of this derelict barracks, led by the resourceful leader Hoffy Hoffman and security officer Frank Price, concoct an intricate plan to facilitate the escape of their fellow prisoners, Manfredi and Johnson. Unfortunately, this bold endeavor comes to a tragic end, resulting in the untimely deaths of both men.
With morale plummeting, suspicion begins to swirl around J. J. Sefton, a wily and enterprising skeptic known for his shrewdness. Sefton, played by William Holden, has forged assets by trading with the German guards for luxuries, establishing a series of odd ventures that inject a sense of normalcy into their confined existence—these include activities like rat racing and bootlegged liquor, alongside a makeshift telescope to spy on Russian women from a nearby compound. His close ally, Clarence "Cookie" Cook, serves as both confidant and narrator, revealing their escapades marked by a blend of admiration and anxiety.
The men of Barracks 4 attempt to manage the monotony of life through comedic relief provided by the barracks jokers Animal Kuzawa and Harry Shapiro, while clandestinely tuning into a hidden radio. Their seemingly jovial guard, Feldwebel Schulz, secretly utilizes a hollow black queen chess piece for smuggling coded messages, manipulating the cord of an overhead light bulb as part of an obscured communication system.
As the holidays approach, a new face emerges within Barracks 4: Lieutenant Dunbar, accompanied by Sgt. Bagradian, who brings thrilling tales of heroism, including an account of a time bomb he devised that obliterated a munitions train. Sefton, ever the skeptic, harbors doubts about this newcomer, speculating that his privileged background has contributed to his success at officer school—an assertion that ignites tension between the two.
With Christmas nearing, Schulz announces the impending visit of an inspector from the Geneva Convention, prompting Sefton to curry favor with the guards to be among the Russian women during the festivities. However, when their coveted radio is seized by Schulz, doubt resurfaces about Sefton's innocence, leading to a violent confrontation where he is brutally beaten by his fellow prisoners. This escalates with von Scherbach's alarming arrest of Dunbar on charges of sabotage, intensifying the already fragile trust among the inmates.
The following day, a seasoned inspector arrives at the camp bearing Red Cross parcels filled with surprising items: 2,000 ping-pong balls, which the prisoners cleverly repurpose into makeshift smoke bombs. The inspector soon learns of Dunbar's drastic removal and proceeds to caution von Scherbach—warning that without substantial evidence, convicting Dunbar could result in severe diplomatic repercussions. Meanwhile, von Scherbach covertly instructs Schulz to deliver the black queen to their informant. In a twist, Price covertly retrieves the queen during the Christmas gathering, intercepting the hidden message and resetting the signal, leading Sefton to grow suspicious of Price's clandestine dealings.
As darkness envelops the camp, Bagradian is pressured into divulging the secret behind Dunbar's time bomb—a simple yet lethal lit cigarette stored within a matchbook. The evening takes a chaotic turn when an air raid siren incites panic, compelling the prisoners to vacate their barracks. Sefton, always alert, witnesses Price in a secretive discussion with Schulz, demonstrating the time bomb as evidence against Dunbar—convincing Sefton that Price has aligned himself with the enemy.
On Christmas Day, the SS arrives at the camp to escort Dunbar to Berlin, prompting Hoffy to assign Price the task of monitoring Sefton, who remains suspected of disloyalty. As Hoffy secretly rallies the men of Barracks 4 to plot a daring rescue for Dunbar, a riot erupts, and a smoke bomb ignites, creating the perfect cover for the escape. Amidst the turmoil, Dunbar is hidden away in the water tower until it is safe to move.
As von Scherbach threatens to obliterate the camp, the chilling truth dawns on the prisoners: one of their own must assist in Dunbar's escape. Price steps forward, but Sefton is left in shock when he uncovers Price's betrayal—his true identity as a German spy. As Price attempts a getaway, he is seized by the prisoners, who seek justice.
Sefton seizes the moment to redeem himself, embarking on a mission to rescue Dunbar. He retrieves the Lieutenant just as the prisoners seek retribution on Price, forcing him out of the barracks with cans clanging at his feet. As Price stumbles beneath the weight of his punishment, he inadvertently draws the gaze of the guards, whose gunfire ultimately claims his life.
In the aftermath, as Sefton and Dunbar manage to slip through the pandemonium and away from the camp, the remaining prisoners retreat to their quarters. Cookie takes a moment to whistle "When Johnny Comes Marching Home," a haunting reminder of the grim realities faced by those imprisoned within the confines of barbed wire.
