In 1912, thirteen-year-old Henry “Indiana” Jones, Jr is horseback riding with his Boy Scout troop at Arches National Park in Utah. While scouting caves, Indy discovers a group of grave robbers who have found a golden crucifix belonging to Coronado and steals it from them, hoping to donate it to a museum. The men give chase through a passing circus train, leaving Indy with a bloody cut across his chin from a bullwhip and a new phobia of snakes. Indy escapes, but the local sheriff makes him return the cross to the robbers, who immediately turn it over to a mysterious benefactor wearing a Panama Hat. Impressed with Indy’s bravery, the leader of the robbers gives Indy his fedora to encourage him to not give up.
In 1938, Indy battles “Panama Hat” and his henchmen on a ship off the storm-blasted coast of Portugal, and escaping overboard just before the ship explodes, he recovers the cross and donates it to Marcus Brody’s museum. Later, Indy is introduced to Walter Donovan, who informs him that his father, Henry Jones, Sr., has vanished while searching for the Holy Grail, using an incomplete inscription from a stone tablet as his guide. Indy receives Henry’s Grail diary via mail from Venice, Italy, and heads there with Marcus, where they meet Henry’s Austrian colleague Dr. Elsa Schneider. Beneath the library where Henry was last seen, Indy and Elsa discover a set of half-flooded catacombs that house the tomb of a First Crusade knight, which contains a complete version of the inscription that Henry had used, revealing the location of the Grail. They flee when the petroleum-saturated waters of the catacombs are set aflame by the Brotherhood of the Cruciform Sword, a secret society that protects the Grail from evildoers. Indy and Elsa capture one of the Brotherhood, Kazim, who tells Indy where Henry is being held after Indy explains that his only goal is to find Henry, not the Grail. Marcus reveals a map drawn by Henry of the route to the Grail, which begins in Alexandretta. Indy removes the map from the diary, gives it to Marcus for safekeeping, and sends him to İskenderun, the city built on the ruins of Alexandretta, to rendezvous with their old friend Sallah.
Indy and Elsa head to a Nazi-controlled castle in Austria where Henry is being held. Indy finds Henry, but learns that both Elsa and Donovan are actually working with the Nazis and are using the Joneses to find the Grail for them. Marcus is captured in Hatay while meeting with Sallah. After escaping from the castle, Henry tells Indy that the Grail is guarded by three booby traps and his diary contains the clues needed to pass them safely. Indy recovers the diary from Elsa at a book burning rally in Berlin, briefly coming face-to-face with Hitler. They board a Zeppelin to leave Germany, but the Nazis discover the Joneses are aboard. The Joneses escape in a parasite biplane, and crash while engaging in a dogfight with Luftwaffe fighters.
The two meet up with Sallah in Hatay, where they learn of Marcus’ abduction. The Nazis have been equipped by the Sultan of Hatay and are already moving toward the Grail’s location, using the map possessed by Marcus. Indy, Henry, and Sallah find the Nazi expedition, which is ambushed by the Brotherhood. During the battle, Henry is captured by SS Colonel Ernst Vogel while attempting to rescue Marcus from a tank; Kazim and his comrades are killed. Indy pursues the tank on horseback and, with the aid of Sallah, saves Henry and Marcus. He is caught up in a fight with Vogel, and barely escapes before the tank goes over a cliff, sending Vogel to his death.
Indy, Henry, Marcus, and Sallah catch up with the surviving Nazis, led by Donovan and Elsa, who have found the temple where the Holy Grail is kept but are unable to get past the three protective traps. Donovan shoots and mortally wounds Henry in order to force Indy to risk his life in the traps to find the Grail and use its healing power to save his father. Using the information in the diary and followed by Donovan and Elsa, Indy safely overcomes the traps and reaches the Grail’s chamber, which is guarded by a knight. He has been kept alive for 700 years by the power of the Grail, which is hidden among dozens of false grails; only the true Grail grants eternal life, while a false one will kill the drinker. Elsa selects a golden chalice studded with emeralds for Donovan, who rapidly ages into dust after drinking from it, proving it to be false. Indy picks a simple wooden cup, and the knight tells him that he has “chosen wisely,” proving it to be the right one but warns that the Holy Grail cannot be taken beyond the temple’s entrance, in accordance with the Law of God.
Indy fills the Grail with holy water and gives it to Henry, healing him instantly. Elsa disregards the knight’s warning and tries to take the Grail with her, causing the temple to collapse around them. When the Grail falls into a chasm in the floor, Elsa plummets to her death trying to recover it, due to her being unable to let go of her obsession with it. Indy nearly suffers the same fate before Henry urges him to leave it. The Joneses, Marcus, and Sallah escape the temple and ride off into the sunset.