The opening of the novel The Hound of Baskervilles has a mystery being solved by Sherlock Holmes and Dr. Watson. There is a cane that has been left at their office by a visitor, the identity of whom the two are yet to deduct. Sherlock gives Watson an example of his observational genius by predicting that the owner, a James Mortimer, will be coming to get his cane back. He also predicts that the gentleman is going to come in with a case for them to solve.
James Mortimer enters the the office and shows them the 18th century manuscript and gives them the account of the myth of the lecherous Hugo baskerville. The man, he recounts, had imprisoned a young country girl and had kept her at his estate in Devonshire. The man, however, was killed by a hound, while he was chasing the girl through the moors one day. Since then, the estate and Baskerville line has been plagued by a mysterious black hound. The recent death of Sir Charles Baskerville has reaffirmed the fear in the family. The next to kin of the deceased had reached London to assume the post at Baskerville, but has been scared into not coming, through an anonymous warning note. His shoe has also been stolen.
Once they agree to take the case, they find out that Henry Baskerville is being followed around in London by some stranger with a beard. It is yet not known if the stranger is a friend or an enemy. Sherlock sends Dr. Watson to get to the bottom of this, since he going to Devonshire with Sir Henry and Mr. Mortimer.
Once he reaches there, Watson finds that the place is in a state of emergency, since a notorious prisoner has escaped into the moors. He meets potential suspects Mr. and Mrs. Barrymore, the domestic help, as well as Mr. Jack Stapleton and his sister Beryl.
The mysterious events start occurring soon after. Barrymore is caught stealthily moving around in the mansion, a mysterious figure is seen lurking, keeping a watch over the moors, and a dog's howling can be heard. Beryl also tells Watson about the encounter between the late Sir Charles and a woman called Laura Lyons the same night he died.
Watson finds out soon enough that the reason Barrymore has been lurking around at night is to keep the escaped convict safe, since the latter is Barrymore's brother. He also speaks to Laura Lyons and tries to find out if she's involved. To his surprise, the lonely figure keeping a watch on the moor is none other than Sherlock himself. He has been hiding so that the person behind the mystery does not get alerted.
He reveals that Mr. Stapleton is next in line to inherit the fortune and has been clearing his path for the same. He convinced Laura Lyon to request Sir Charles to come to the moor, where his pet pooch attacked the nobleman, causing a heart attack and consequent death.
In the final scene, Holmes and Watson use the Henry Baskerville as a bait to catch Stapleton red-handed. While Henry Baskerville is heading home from dinner at the Stapleton's, and is stopped by the pet pooch. In an attack of panic, Stapleton runs from his house and accidentally drowns on the marshland. The others find Beryl tied up in the house. Beryl is actually Stapleton's wife, not his sister. She had refused to be part of Stapleton's scheme.
It is also found that the shoe was stolen so that the hound could know Henry Baskerville's scent, and the note was sent by Beryl, to whom Stapleton had denied his marriage so that he could lure Laura Lyon. Watson files the case closed.
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