In 1890s London, Robert Angier and Alfred Borden work as shills for a magician, under the mentorship of John Cutter, an engineer who designs stage magic. During a water tank trick, Angier’s wife Julia fails to escape and drowns. Angier, devastated, accuses Borden of using a riskier knot, causing her death. The two become bitter enemies.
Angier and Borden launch their own magic careers. Borden develops a trick he calls the Transported Man, in which he appears to travel instantly between two wardrobes on opposite ends of the stage. Unable to discern Borden’s method, Angier hires a double, Gerald Root, to perform his own version of the trick. The imitation is a greater success, but Angier is dissatisfied, as he ends the trick hidden under the stage while Root basks in the applause.
Angier has his assistant Olivia spy on Borden to learn how he performs the Transported Man. However, Olivia falls in love with Borden and becomes his assistant. With her help, Borden sabotages Angier’s act. Confronted by Angier, Olivia gives him a copy of Borden’s encoded diary. Angier acquires the keyword to decode it, “TESLA”, by threatening to kill Borden’s stage engineer, Fallon.
The diary takes Angier to America to meet scientist Nikola Tesla. Angier believes Tesla built a transporting machine for Borden, although he later learns the diary is a fiction, planted by Borden through Olivia as a distraction. However, Tesla does indeed build a machine for Angier, though, unexpectedly, instead of teleporting objects, Tesla’s machine duplicates anything placed inside it a short distance away. Tesla is driven out of Colorado Springs by agents of his rival, Thomas Alva Edison, but has the machine delivered to Angier. He advises Angier to destroy it, saying it will bring him nothing but misery.
Borden’s wife, Sarah, is driven to suicide by his contradictory personality. Afterwards, Borden tells Olivia that he never loved Sarah and that he loves her more. Unsettled, and tired of Borden and Angier’s feud, Olivia leaves. In London, Angier debuts the Real Transported Man using Tesla’s machine, appearing to teleport across the theater each night. Perplexed by the new trick, one night Borden sneaks backstage, only to witness Angier fall through a trapdoor and drown in a water tank, just as Julia did. Borden is discovered by Cutter and turned over to the police. Unable to prove his innocence, Borden is found guilty of murder and sentenced to death.
In prison, Borden is visited by a Lord Caldlow, accompanied by Borden’s daughter Jess. Caldlow is revealed to be Angier. In exchange for his secrets, Borden pleads with Angier to let his daughter go, but Angier isn’t interested and leaves with Jess as his ward. When Cutter realises that Angier is still alive, he is disgusted at Angier’s plan to discredit and kill Borden, but agrees to help dispose of Tesla’s machine. Borden is hanged for Angier’s murder.
Angier returns to the theater with Cutter, who ponders the agony of drowning while looking at several water tanks that Angier has stored there. Cutter leaves, acknowledging a stranger who enters and shoots Angier: Borden. Angier discovers that “Borden” was an identity shared by identical twins. The brothers performed the original Transported Man together; in life, when one was “Borden”, the other was disguised as “Fallon”. The surviving twin loved Sarah while his brother had loved Olivia.
Borden laments that everything Angier did was for nothing, but Angier denies this, saying that witnessing the audience’s amazement had been the goal all along. Angier dies, dropping his lantern and setting the theater alight. Borden leaves to pick up Jess at Cutter’s workshop, but as he leaves he realises Angier’s sacrifice; while waiting for Borden to enter his trap each performance night, Angier would be duplicated by Tesla’s machine, while the original would drown in a tank beneath the stage – the water tanks all hold dead Angiers.