In London, Vivian Vedder, Renee Godfrey verifies that a carpenter has finished a coffin for her recently deceased mother's body, which she is transporting to Scotland by train. She boards the train that evening, joined by Lady Margaret Carstairs, Mary Forbes, who owns the famous Star of Rhodesia diamond; Lady Margaret's son, Roland, Geoffrey Steele. Also aboard are Sherlock Holmes, Basil Rathbone, hired by Roland to protect the gem; Dr. Watson, Nigel Bruce, and Watson's friend Major Duncan-Bleek, Alan Mowbray; Inspector Lestrade, Dennis Hoey, who shares concerns about the diamond's safety. Holmes briefly examines the diamond and sizes up the danger ahead.
Shortly after departure, Roland is murdered and the diamond is stolen. The investigators learn nothing conclusive from questioning the other passengers. At one point, Watson suspects an elderly couple of guilt, but the only crime they have committed is stealing a teapot from a hotel. While the search continues, Holmes is shoved from the day coach and nearly falls to his death, but he climbs back aboard and discovers a hidden compartment in the coffin carrying Vedder's mother. He grows suspicious that one of the passengers is the notorious jewel thief Colonel Moran, Alan Mowbray.
As the questioning deepens, Miss Vedder admits that a man paid her to transport the coffin. With Watson and Major Duncan-Bleek aboard, Holmes reveals a crucial ruse: he swapped the real diamond for an imitation during his inspection, so the genuine gem appears to be in Lestrade's possession. In the luggage compartment, Sands, Skelton Knaggs, a street criminal, incapacitates the conductor with a poisoned dart. Sands is hidden inside the coffin and is Moran’s accomplice, but Moran double-crosses Sands, shooting him dead with the same dart gun he used to kill Roland and the guard.
The train makes an unexpected stop to pick up several Scottish policemen led allegedly by Inspector McDonald. Holmes informs McDonald that Duncan-Bleek is Moran, and McDonald arrests Moran, finding the diamond in Moran’s vest—but Moran seizes a policeman's gun and pulls the emergency cord to halt the train. In a tense blackout, Holmes subdues Moran and hides him under a table. When the lights return, the officers depart with Lestrade, his coat draped over his face, mistaken for Moran. As the train pulls away, Lestrade captures the thieves at the railway station, and Holmes reveals to Watson—and Moran—that he recognized McDonald as an impostor and had recovered the diamond from him during the confrontation.
