Teenagers Sherlock Holmes and John Watson forge a strong friendship while attending the esteemed Brompton Academy in London. Watson soon meets Holmes' mentor, Rupert T. Waxflatter, a retired schoolmaster and inventive spirit. Complicating their friendship is Waxflatter's niece, Elizabeth, who captures Holmes' affections, sparking rivalry with another student, Dudley (Earl Rhodes), despite her clear preference for Holmes.
Amidst their budding friendships and budding romances, a mysterious hooded figure employs a blowpipe to harm several individuals, leading to haunting deaths: Bentley Bobster leaps to his demise, and Reverend Duncan Nesbitt is crushed by a horse-drawn carriage. Suspicion arises in Holmes’ mind, but Inspector Lestrade from Scotland Yard dismisses his theories. In a cruel twist of fate, Dudley manipulates events resulting in Holmes’ unjust expulsion. In a final duel with his fencing instructor, Professor Rathe, Holmes is distracted by a glint from Rathe's ring, leading to his defeat.
Tragedy strikes further when the hooded figure attacks Waxflatter, causing him to suffer from violent hallucinations before his demise. His last cryptic utterance, "Eh-tar," echoes in Holmes’ mind as he teams up with Watson and Elizabeth to unravel the mystery behind these alarming events. Together, they piece together a series of clues, including a jingling sound associated with the killer and a piece of cloth found at the scene of Waxflatter's murder, ultimately revealing the presence of Rame Tep, an ancient Egyptian cult dedicated to the worship of Osiris. This cult is notorious for employing blowpipes to administer hallucinogenic thorns, creating vivid nightmares for their victims.
Their inquiry leads them to a hidden warehouse of Froggit and Froggit, where they uncover a group recapping the rituals of the Rame Tep cult amid a wooden pyramid reconstruction. As Holmes interrupts a sacrificial ceremony, they encounter grave danger as the cultists retaliate, but with Holmes' grit and the assistance of a graveyard caretaker, they manage to escape the terrifying hallucinations and their relentless pursuers.
Later, they find themselves at Waxflatter's loft, where a shared photograph reveals the sinister connection among the three deceased victims and a fourth man, Chester Cragwitch. Just as they are on the verge of uncovering the truth, they are caught by Mrs. Dribb, threatening their very freedom. Nevertheless, a daring escape ensues as Elizabeth returns to salvage her uncle's unfinished work, while Holmes and Watson seek out Cragwitch for further insights.
Cragwitch shares a fateful tale about discovering an underground pyramid during a hotel construction in Egypt, unleashing a fierce backlash from local inhabitants that led to horrifying consequences; one boy—Eh-Tar—vowed revenge after losing his family in the chaos. However, as Cragwitch falls victim to the same thorn that felled the others, he turns on Holmes but is subdued by LeStrade, who has come to regret dismissing Holmes' earlier claims.
Upon returning to campus, Holmes has an epiphany—Rathe is actually Eh-Tar, but they arrive too late to thwart his and Mrs. Dribb's abduction of Elizabeth. Utilizing Waxflatter's ingenious flying contraption, they race against time to the warehouse, where a climactic confrontation ensues: Rathe attempts to complete his ritual sacrifice, only to face unexpected retaliation from Holmes. Fighting breaks out; in the chaos, Watson foils Rathe's escape plan while Mrs. Dribb meets her demise.
As Holmes duels Rathe, a tragic moment unfolds when Elizabeth is fatally shot while trying to protect Holmes. In the aftermath, as Holmes grieves, he reflects on how the clues unraveled to expose Rathe and Mrs. Dribb as the revengeful siblings, with Watson humorously pointing out that Rathe's name is a reverse anagram for Eh-Tar—an insight that eluded Holmes. As he departs, Watson, now older and reminiscing, wishes for more adventures alongside Holmes. In a final twist, Rathe, presumed dead, resurfaces under the guise of "Moriarty," heralding a new chapter as Holmes’ greatest adversary.
