Low-scale private investigator J.J. “Jake” Gittes is hired by a woman named Evelyn Mulwray to following her husband, Hollis. Hollis Mulwray is an engineer for the Los Angeles Department of Water and Power. During the tailing of Mr. Mulwray, Gittes learns that the engineer is opposed to the planned construction of a new water supply reservoir and snaps some pictures of him meeting with a pretty young woman. The next day, some of those photos appear on the front page of the newspaper. Jake is in his office when he is introduced to a woman calling herself Mrs. Evelyn Mulwray. Gittes has just learned that she is the real wife of Hollis and the other Mrs. Mulwray was a fake intended to set him up. The real Evelyn informs Jakes that he very shortly expect to be named in a lawsuit.
Jake quickly deduces that the actual target here was not Hollis Mulwray, but his wife. The next obvious action is to interview Hollis, but before he can do that, Hollis is found dead in a freshwater reservoir. In the employ of the real Mrs. Mulwray, Jake investigates further and discover something quite odd: enormous volumes of water are recorded as being release from the reservoir on a daily basis, yet the land where the water supposedly is going remains perpetually parched.
When Jake goes back to the reservoir where the body of Hollis was found one night, he is startled by two gunshots ringing in the air. Almost immediately, the sluice gate opens and Jake is nearly drowned as the rushing water carries him through a channel. Finally, he manages to climb to safety only to be confronted with charges of trespassing by Water Department Security Chief Claude Mulvihill. As a warning to keep his nose out of places where it doesn’t belong, a short little henchman who arrived with Mulvihill slashes through one of Jake’s nostrils with a knife.
Meanwhile, Gittes gets a call from a woman identifying herself as Ida Sessions; Ida was the woman pretending to be Evelyn. She won’t give the name of who employed her, but advises Jake to check out the newspaper obituaries.
Having learned that Hollis Mulwray was a business partner of Evelyn’s rich father Noah, Jakes decides it’s time to pay a visit to the old man. Noah has more advice for Jake and his nose: he does comprehend the magnitude of power of the people who is messing with. He also offers Jake double his standard fee for locating a missing woman who was Hollis Mulwray’s mistress.
Jake heads to the hall of records and finds that the real estate situation is complicated in the Northwest Valley. When he goes there to investigate further, landowners descend on him under the impression he works with the water department and is part of the conspiracy to force them to sell their land by cutting off their supply of water.
Jake informs Mrs. Mulwray that her husband was murdered as a result of discovering that water from the reservoir was being redirected in order to create a drought conditions that would build support for construction of a new reservoir while also reducing the value of the land where the water isn’t going so it can be bought as bargain prices. Having also discovered that one of the new owners of land up in the valley is a former resident of a retirement home, Jakes convinces Evelyn to help him bluff his way into the retirement home to seal the deal on his suspicion that the shady real estate deals are being done with names of the home’s residents.
That night, Jake and Evelyn sleep together at her home, but when Evelyne wakes the next morning, she abruptly last to leave and then warns Jake that her father is not someone to be trifled with. Jake follows Evelyn to a house where he watches through a window as she seems to be comforting the mysterious mistress of Hollis Mulwray: the pretty young girl whose pictures with Mulwray appeared in the paper. Confronting Evelyn, Jake accuses her of holding the woman hostage and slaps the shocking revelation out of her that the girl is not her husband’s mistress, but her sister.
The day after discovering that Noah had an incestuous relationship with Evelyn, Jakes heads to Ida Sessions’ apartment after receiving an anonymous call. There he finds Ida dead and LAPD Lt. Escobar waiting for him. Escobar informs Jake that salt water was detected in Hollis Mulwray’s lungs. In other words, he did not die in the freshwater reservoir in which his body was found. Escobar warns Jake to hand over Evelyn as she is now the prime suspect. When he arrives at her home, her servants are packing her bags. Jake realizes that the water garden outside has salt water in the pond inside that pond are a pair of glasses.
Filled with confusion and driven by the unanswered questions that permeate this case, Jake grabs Evelyn and demands to the truth about her sister. After some evasion, Jake finally manages to slap the horrifying truth out of her. The pretty blond girl in the pictures he saw holed up in the house the other day really is her sister…and also her daughter. Katherine is the offspring being raped by her own father when she was a teenager. As for the glasses in the pond, they do not belong to her husband because he did not wear bifocals.
After making arrangement to secret Evelyn and Katherine out of the US into the safety of Mexico, Jake tells Evelyn to meet him at the Chinatown home of her butler. He then invites Noah to Evelyn’s house to arrange their deal to get him off the case. Noah finally admits to the scheme that involves an annexation of the Northwest Valley properties into the city limits of Los Angeles so that water from the reservoir can be used for irrigation which will in turn result in massive real estate development deals. Jake now accuses him of the murder of Hollis, but takes possession of the incriminating bifocal glasses as his thugs force Jake to drive to them where Evelyn and Katherine waiting.
Upon arrival in Chinatown, the police are waiting at the butler’s home and promptly detail Jake. Noah moves toward Katherine, but Evelyn produces a gun and shoots her father in the arm before attempting to escape with Katherine by car. The police start shooting and one of the bullets hits Evelyn, killing her. Noah gets Katherine out of the car and walks away with her while Lt. Escobar orders the officers to release a Jake devastated not only by the death of Evelyn but the realization that the monstrous Noah is going to get away with everything. As he struggles to understand how this could possibly happen, one of his partners offers the best advice he’s got: “Forget it, Jake. It’s Chinatown.”