Miss Wonderly hires private detectives Sam Spade and Miles Archer to follow Floyd Thursby, an Englishman who ran away with her sister. Openly attracted to Wonderly, Archer volunteers to follow Thursby during his meeting with Wonderly that night, but Archer is shot and killed. Detective Tom Polhaus informs Sam that Archer was killed with an English gun. Later that night, Thursby is shot dead. Detective Dundy suspects Sam of killing Thursby. Sam refuses to tell them Wonderly's name.
Archer's widow Iva asks Sam if he killed Archer. Sam and Iva have been having an affair, which Sam now regrets. I bet! Sam orders his secretary Effie to remove Archer's desk from the office and rename the agency from Spade and Archer to Samuel Spade. There's no time for renovations like right after a funeral!
Wonderly has Sam come to her apartment and confesses that her real name is Brigid O'Shaughnessy and there is no sister that's run away with Thursby. She says she's in trouble and Thursby was supposed to protect her.
At his newly-renovated office, Sam is visited by flaming homosexual Joel Cairo, who keeps putting his phallic cane in his mouth. Cairo's mouth, not Sam's. Too bad for Cairo. Piqued by news reports over a link between Archer's and Thursby's deaths, Cairo offers Sam 5,000 dollars for the falcon.
As Sam goes to visit Brigid, he notices he's being followed but shakes his tail easily. He's attracted to Brigid-they suck face. But she won't confide in him until she can talk to Cairo. During a meeting with Cairo, Brigid says Thursby hid the falcon but she'll have it in a week. Sam questions Brigid again, but she's coy and flirtatious with him.
The same man who was tailing Sam earlier follows him to Cairo's hotel but Sam exposes the tail to the hotel detective. At the office, Sam gets a message from Gutman, the tail's boss. Sam tells Gutman he's representing himself, not Brigid or Cairo, and he knows where the falcon is. Sam wants Gutman to tell him what the falcon is. Gutman refuses and Sam fakes a violent outburst. Sam leaves as Cairo is on his way to visit Gutman. Later, Gutman's man Wilmer brings Sam to Gutman. Gutman tells Sam the legend of the falcon. More importantly to Gutman and the viewer, the falcon is made of gold and jewels. Gutman offers Sam 50,000 dollars in exchange for the falcon. Sam passes out after having a drugged drink.
Sam awakens alone in Gutman's apartment and finds a newspaper with an item about a ship arriving in San Francisco from Hong Kong. La Paloma, the ship is torched. As his secretary Effie is patching up Sam in his office, a man staggers in, drops a bundle wrapped in newspaper and dies from his multiple bullet wounds. Now that's what I call delivery service! The man is Captain Jacobi from the La Paloma. Sam gets an urgent call for help from Brigid but he deposits the bundle in a bus station locker before cabbing it to her rescue. There he finds a deserted building.
At home Sam finds Gutman, Cairo, Wilmer and Brigid waiting. Sam wants to trade the falcon for money and a fall guy for the three murders. Gutman says Wilmer killed Thursby to scare Brigid into dealing with them because Thursby was loyal to Brigid. Wilmer torched the La Paloma and shot Jacobi who had been carrying the falcon for Brigid but Jacobi got to Sam before dying. Gutman and company made Brigid fake the call for help to Sam to lure Sam away before Jacobi got to him but were unsuccessful.
Sam has Effie retrieve the falcon and deliver it to his apartment. Gutman discovers that the falcon is a fake and sets off with Cairo to Istanbul to try and get the real thing. Sam sends the cops after Wilmer for Thursby's and Jacobi's murders, and Gutman and Cairo for campy acting.
Sam accuses Brigid of killing Archer and trying to play Archer and Thursby against each other, hoping one would kill the other and then get the rap. The plan failed when Thursby refused to kill Archer, so she killed Archer herself. Brigid wanted to scare Thursby out of his share of the profits when they turned the falcon over to Gutman. Brigid says she loves Sam. Sam says he may be in love with her but since she killed his partner, he has no choice. He turns her over to the cops for Archer's murder.