West Berlin's MI6 outpost, led by Alec Leamas [Richard Burton], has suffered from reduced effectiveness after the death of one of its operatives. He is recalled to London shortly after the event and is seemingly drummed out of the agency. In reality, a carefully staged transformation of Leamas has been arranged by Control [Cyril Cusack], the agency's chief. Appearing to be depressed, embittered and alcoholic, Leamas takes work as an assistant at a local library. There he begins a relationship with Nan Perry [Claire Bloom], a young and idealistic member of the British Communist Party. Leamas spends most of his small salary on alcohol, leaving him constantly low on funds. He drunkenly assaults a shopkeeper who refuses him credit and is briefly jailed. His predicament attracts the attention of the East German Intelligence Service, which sees him as a potential defector.
Leamas is approached by a series of operatives, each one passing him up the chain of the East German intelligence service, and he expresses a willingness to sell British secrets for money. He eventually flies to the Netherlands to meet an agent named Peters [Sam Wanamaker], who decides that his information is important enough to send him on to East Germany. At a German country house, Leamas is introduced to Jens Fiedler [Oskar Werner], who becomes his main interrogator. Leamas then begins to carry out his secret mission, which is to share information that suggests Hans-Dieter Mundt [Peter van Eyck], his supervisor, is a paid informant of the British. The evidence is circumstantial, and though it seems to implicate Mundt, Leamas repeatedly rejects that conclusion, claiming that an important East German official could not have been a British agent without his knowledge. However, Fiedler is able to independently confirm Leamas' information and comes to the conclusion that Mundt has indeed been a secret asset of British intelligence for many years.
Mundt himself unexpectedly arrives at the compound and has both Leamas and Fiedler arrested for plotting against him. Once Fiedler explains his findings to his superiors, the tables are turned and Mundt is arrested. A secret tribunal is convened to try Mundt for espionage, with Leamas compelled to testify. Fiedler presents a strong case for Mundt being a paid double agent. However, Mundt's attorney uncovers several discrepancies in Leamas' transformation into an informant, suggesting that Leamas is a faux defector. Leamas' credibility collapses when Nan, who has been brought to East Germany for what she thought was a cultural exchange visit, is forced to testify at the tribunal and unwittingly reveals that she has been receiving payments from a British intelligence officer as Leamas had arranged. Faced with this testimony, Leamas reluctantly admits that he is indeed a British agent. Mundt is vindicated, and Fiedler is arrested as a complicit dupe.
Leamas initially believes he has failed in his mission and fears severe retribution from Mundt. However, in the middle of the night, Mundt releases Leamas and Nan from their cells and provides an escape plan for them both. Mundt explains that Leamas' real mission has succeeded; Mundt actually is a British agent, and Fiedler had been the target of the operation all along, as he had grown too suspicious of his supervisor. This comes as a shock to Leamas, and the complex web he has been drawn into and the risk he has been placed in by his own superiors become painfully clear. He explains the entire plot to still-idealistic Nan as they drive their borrowed car toward the border. She berates him for being involved in what amounts to the murder of Fiedler, who was only doing his job. Leamas, agitated by her naiveté, erupts in an angry, self-loathing confession.
Leamas and Nan arrive at the Berlin Wall and are given instructions to climb over to West Germany on an emergency ladder while a searchlight is intentionally turned away. Leamas is at the top of the wall pulling Nan up behind him when the searchlight suddenly shines directly on them, alarms sound, and Nan is shot dead by Mundt's operatives, silencing the only civilian witness to the operation. Leamas freezes in shock and horror, and is urged by agents on both sides to return to the West. Instead, he begins to climb down towards Nan's body on the eastern side of the wall, where he is also shot and killed.
