At the outset of the novel [[John Watson|Doctor Watson]] states that he has been watching [[Sherlock Holmes|Holmes]] takes cocaine three times a day for many months. Watson's reluctance to oppose Holmes is finally overcome and he confronts his friend about the potential ill effects of this prolonged usage.
Holmes explains that he finds the drug stimulates and clarifies his mind and that, without work to challenge his mental faculties, he becomes bored with day-to-day life.
A young lady named [[Mary Watson|Mary Morstan]] comes to consult Holmes upon a case which she assures him is very unusual. Miss Morstan's father disappeared some years previously under suspicious circumstances. He had obtained twelve months leave from his Indian regiment and sent word to her to meet him at his hotel. Whilst the hotel confirmed that he was staying there they informed Miss Morstan that he had gone out and not returned. Inquiries at the time produced no result. Major Sholto was Morstan's only known friend in London, the two had been in the same regiment together. Sholto had retired from service at that time and claimed not to have even known that Morstan was in the country.
A few years after this disappearance an advertisement appeared in a paper asking for Miss Morstan to reveal her address. Upon the advice of her employer she did so and that same day she received a valuable pearl in the post. Since then she has received one pearl a year for the last six years.
Miss Morstan has now received a letter which urges her to meet with the sender that night. The anonymous sender permits her to bring two friends as long as they are not police. Later that night on their way to the rendezvous Miss Morstan tells Holmes that Sholto and her father were in charge of the convict guard at the Andaman Islands. She also shows Holmes a strange paper which was found among her father's things after he disappeared, the document appears to be a map and a sign with four crosses in a straight line with touching arms is present in the corner. Written below the sign are the words "The Sign of Four" along with three Indian names and one English name.
Holmes discovers that Major Sholto died about six years previously, within a week of the date of his passing Miss Morstan received her first pearl. This fact suggests that Sholto's heir knows how Captain Morstan died and wishes to make reparation to Miss Morstan.
Upon reaching the rendezvous Holmes, Watson and Miss Morstan are met by a coachman and conveyed to the home of Thaddeus Sholto. Thaddeus and his twin brother Bartholomew are the only children of the deceased Major Sholto who eleven years previously had returned to England in possession of great wealth and settled in Upper Norwood. Thaddeus relates that his father was fearful of his personal safety and also seemed to have an aversion to men with wooden legs.
On his deathbed, Major Sholto told his sons that whilst in India he and Morstan came into possession of a large quantity of treasure. Sholto brought the wealth back to England with him and when Morstan returned he came immediately to Sholto's house to demand his share. The two men argued over the division of the treasure and Morstan suffered a fatal heart attack. Fearing that he would be implicated in the death, and that he would have to explain the story behind the treasure to the authorities, Sholto disposed of the body.
On his deathbed Major Sholto urged his sons to give Miss Morstan the half share of the treasure that should rightfully have been hers and explains that avarice kept him from doing so himself. Sholto was about to tell his sons the location of the treasure when he caught sight of a man at the window and died without imparting the whereabouts of the treasure.
The two brothers made every effort to find the treasure after their father's death but were not successful. Major Sholto had removed a chaplet to send to Miss Morstan before he died, Thaddeus proposed sending it to Miss Morstan but Bartholomew, inclined to his father's avarice, opposed the idea and so Thaddeus compromised by sending her one pearl a year. Bartholomew has now found the treasure and so Thaddeus has contacted Miss Morstan with the idea that together they will go and claim their respective shares.
Late that night the party arrive at Pondicherry Lodge and once within the house they discover that Bartholomew Sholto is dead, seemingly poisoned by a thorn lodged in his skin. A note reading "the sign of four" is found and the box of treasure has been stolen.
By an examination of the room Holmes determines that there were two people present when the treasure was removed. One was a wooden legged man and the other an extremely agile accomplice who shot a poisoned dart at Bartholomew Sholto. Athelney Jones of the official police force arrives, is dismissive of Holmes and arrests Thaddeus for the murder of Bartholomew. Holmes gives Athelney a description of the real perpetrators including one man named Jonathan Small.
Holmes tells Watson that the explanation for the events is that Morstan and Sholto were informed by some convicts in the Andaman Islands of the existence of the treasure. The officers crossed the convicts in some way and Jonathan Small, one of the four, has now claimed the treasure for himself.
Holmes uses a dog to follow the scent of the men they seek, one of whom trod in creosote at the scene of the murder. Toby leads Holmes and Watson to a small wooden wharf where evidently the men took a boat. Holmes manages to discover that Jonathan Small has hired a steam launch called the Aurora. Holmes engages his Baker Street irregulars, a band of young boys from the streets who are given the task of finding the Aurora. Holmes and Watson conclude that Jonathan Small's companion is an Andaman Island aborigine.
A few days pass and no progress is made, Athelney Jones comes to [[221B Baker Street|Baker Street]] and tells Watson that he needs help from Holmes and that he had a message from the detective instructing him to go to Baker Street and wait. Watson explains that Holmes has gone out and is expected back later that day. Holmes enters disguised as an old mariner and is delighted when he is able to fool both of this friends with the device.
That night Holmes works with the police to pursue Jonathan Small. Holmes concludes that Small must have arranged that the Aurora be handed into a repair shop to hide it in case the trail was followed, via his disguise Holmes managed to locate the repair shop where the Aurora was kept and discover the time when it would be collected for use once more.
The Aurora is spotted and pursued, Jonathan Small is captured and his aboriginal companion is shot dead. An iron chest is found on the Aurora and presumed to contain the treasure but ultimately turns out to be empty. Jonathan Small. Small explains that he threw the treasure overboard since no one has a right to it save himself and three Indian men still in the Andaman convict barracks.
Small met the other men with whom he acquired the treasure when he was a guard in the city of Agra. One night two Sikh men who were under Small's command threatened his life. They told him that either he could join with them and be rich or that they would kill him. The two guards and a third man planned to bring a rich merchant to Agra and murder him for the wealth he would be carrying with him, Small agreed to assist. Once the merchant had been killed the men hid both the body and the treasure. An oath was sworn between them that they should always act for each other as much as themselves, the sign of four.
The plan went wrong and the four men were arrested for murder and sentenced to penal servitude for life. Small was transferred to the Andaman Islands. Small met Morstan and Sholto and offered them a deal, if they could secure freedom for him and his three companions then the officers would be cut in for an equal share of the wealth. An agreement was made and Sholto was assigned the task of verifying the treasure's location before helping the convicts to freedom. Sholto cheated them all by recovering the treasure alone and going back to England with it.
Small then saved the life of Tonga, an Andaman Islander, who consequently became very devoted to him. Tonga helped Small escape and the two wended their way to England together. Small received intelligence that the treasure had been discovered and planned his robbery with Tonga's help. Tonga killed Bartholomew Sholto, much to Small's rage since he wished no harm to the young man.
The case is wound up, Small is taken into custody and Watson becomes engaged to Mary Morstan. Since the official forces are receiving the credit for the case Watson asks what Holmes will get out of the affair into which he put so much work and effort. Holmes replies that he has cocaine and reaches for the bottle containing it.