During World War II, when six of eight would-be German saboteurs are sentenced to death by an American court, an FBI agent complains to his boss, Craig, Ward Bond, about the two remaining men. Craig troops in with the plan that one of the sentenced should have been imprisoned, and a flashback begins to tell the tricky story behind that decision.
Carl Steelman, George Sanders, an American attorney, shocks his German-born parents by confessing that he is a member of the German American Bund. His father, Ludwig Stössel, a loyal American, is furious, while his mother, Mama Henrietta Steelman, Elsa Janssen, worries about the dangerous path their son is taking. When Carl attends a Bund meeting, Ernst Reiter, George Sanders, reveals that he has been called back to Germany to be trained as a saboteur. The police break up the meeting; fleeing, Reiter draws a gun and is shot dead. Later, Carl meets with Craig; Carl is actually an undercover FBI agent. Craig informs him that he is to impersonate Reiter and infiltrate the saboteur school.
In Hamburg, Carl becomes friendly with Helga Lorenz, Poldi Dur. Later, Colonel Taeger, Dennis Hoey, informs him that Helga is suspected of being in the German Underground, and orders him to keep seeing her to gather incriminating evidence. After Carl accidentally finds some anti-Nazi leaflets, he warns Helga, but a spying observer with a telescope witnesses this, forcing Carl to denounce her himself. When she refuses to talk, Taeger orders her sent to a concentration camp. Carl manages to intercept the car taking her away and riskily rescues her.
Then Reiter's wife shows up at Carl’s hotel. To prevent her from betraying him, Reiter claims that his "wife" has lost her mind and asks for a day to explain himself. He later tells Colonel Taeger that his wife has gone insane. After questioning the woman himself, the colonel agrees and has her sent to an asylum.
When Carl’s father becomes seriously ill, Craig explains that his son’s real mission must stay secret, not even from his wife. Julius, overcome with emotion, spills the secret to his close friend, Dr. Herman Holger, Sig Ruman.
Because of his excellent performance at the sabotage school, Carl is put in charge of the first group of saboteurs to be sent to America after the United States enters the war. He and three others board a U-boat. When Colonel Taeger learns that there is a Carl Steelman who is really an American agent, he goes to see Frau Reiter; she confirms that Steelman was her husband’s associate in America. Taeger has her shot to cover up his mistake, then sends an urgent message to the submarine captain.
The submarine is attacked by American bombers but escapes unharmed, and the saboteurs depart in a life raft before Taeger’s message is received. On the surface, the four men are spotted on the beach and arrested. Craig instructs Carl to maintain his cover and turn state’s evidence against the others, as well as the four saboteurs sent to Florida.
Carl then goes home to see his parents and Dr. Holger. He informs Holger that he has a list of German agents in America, and that the doctor is on it at number eight. He takes Holger away.
