In 1888 a client, Mary Morstan, comes with two puzzles for Holmes. The first is the disappearance of her father Captain Arthur Morstan in December 1878 and the second is that she has received 6 pearls in the mail from an anonymous benefactor once a year since 1882, since she answered an anonymous newspaper query inquiring for her. With the last pearl she has received a letter remarking that she has been a wronged woman and asks for meeting. Holmes takes the case and soon discovers that Major Sholto — Morstan's only friend who had denied seeing Morstan — had died in 1882 and that within a short span of time Mary began to receive the pearls, implying a connection. The only clue Mary can give Holmes is a map of a fortress with the names of Jonathan Small and three Sikhs, who are named Dost Akbar, Abdullah Khan, and Mahomet Singh.
Holmes, Watson, and Mary meet Thaddeus Sholto, the son of the late Major Sholto and Capt Morstan's Army friend who has sent her the pearls. Thaddeus remarks that his father had a paranoid fear of one-legged men and confirms that Mary's father had seen the Major the night he died. That night, in a quarrel about an Agra Treasure, Morstan — who was in weak health — suffered a heart attack. Not wanting to bring attention to the object of the quarrel to public notice, Sholto disposed of the body and hid the treasure. However his own health became worse when he received a letter from India. Dying, he called his two sons and confessed to Morstan's death and was about to divulge the location of the treasure when he suddenly cried "Keep him out!".
The puzzled sons glimpsed a face in the window but the only trace was a single footstep in the dirt. On their father's body is a note reading "The Sign of Four". Both brothers quarreled over whether a legacy should be left to Mary Morstan and Thaddeus left his brother Bartholomew, taking a chaplet and sending its pearls to Mary. The reason he sent the letter is that Bartholomew has found the treasure and possibly Thaddeus and Mary might confront him for a division of it.
Bartholomew is found dead in his home from a poison dart and the treasure is missing. While the police wrongly take Thaddeus in as a suspect Holmes deduces that there are two persons involved in the murder: a one-legged man, Jonathan Small, as well as another "small" accomplice. He traces them to a boat landing where Small has hired a launch named the Aurora. With the help of his Baker Street Irregulars and his own disguise Holmes traces the launch. In a Police launch Holmes and Watson chase the Aurora and capture it but in the process end up killing the "small" companion after he attempts to kill Holmes with a poisoned dart shot from a blow-pipe. Small tries to escape but is captured. However the iron treasure box is empty; Small claims to have dumped the treasure over the side during the chase.