“The Sign of the Four” begins rather controversially with Holmes engaging in the then legal pastime of cocaine injections, much to Watson’s disapproval. Mary Morstan, a single young woman who desires Holmes’ advice, soon visits the two. Miss Morstan proceeds to explain that after her father disappeared under mysterious circumstances some ten years ago, she had begun receiving a large pearl in the mail at annual increments. Mary goes on to explain that she has received a letter instructing her to go, with the accompaniment of two friends, to Lyceum Theater. The letter itself hints that some injustice has been done to her. Holmes and Watson agree to accompany Miss Morstan, and it is hinted that Watson and Mary are attracted to one another.
When the three journey to the Lyceum Theater, Holmes, Watson, and Mary are whisked away in a darkened carriage to a strange house. Within, they find an eccentric gentleman named Thaddeus Sholto. Sholto reveals that not only has Mary’s father died, but that she is partial heir to a great hidden treasure. Thaddeus goes on to explain that his father had always lived in fear of men with wooden legs, and had on occasion struck out at perfect strangers who were so handicapped. On his deathbed, the elder Sholto had revealed to his sons the existence of the treasure, but just before he could tell them where it was, the face of a bearded man had appeared in the window, and the old man had suffered a fatal heart attack.
The following morning, a note had been found affixed to the body, which read “Sign of Four”. Thaddeus proceeds to explain that after searching for years for the treasure, his brother Bartholomew had discovered it in a hidden attack in the family house. On his deathbed, the brothers’ father had made them swear they would share the treasure with Mary Morstan, who has some unknown claim in the fortune. Thaddeus concludes by entreating the three to accompany him to the family estate where they will divide up the fortune.
Upon arriving at the family estate, the three find a shaken housekeeper who claims that Bartholomew has not emerged from his locked room all day. Holmes and Watson peer through the keyhole of the room and find an unnatural grinning face leering at them. Breaking down the door, they find the body of Bartholomew, with a poisoned thorn in his neck. After investigating for some time, Holmes concludes that two persons, one of whom had a wooden leg, committed the crime. According to Holmes, the second personage was “a very remarkable individual.” It also becomes apparent that the murderers have stolen the Agra treasure.
One of Holmes’ deductions reveals that the wooden-legged man stepped in creosote in his escape. Following up on this lead, Holmes and Watson borrow a dog to follow the scent. Their search leads them to the edge of the Thames, where it is clear the two criminals hired a boat. Over the next few days, Holmes recruits his “Baker Street Irregulars”, a gang of street urchins, to search the river for the boat. When these efforts fail, Holmes, in disguise, makes a search himself, and discovers that the Aurora, the name of the boat, has been camouflaged.
That night, Holmes, Watson, and several officers pursue the Aurora in a police barge. They gradually overtake the boat which contains the captain, a wooden legged man, and a small pygmy native from the Andaman Islands. The native attempts to shoot Holmes with a blowpipe, and is consequently shot down by both Holmes and Watson. The Aurora runs aground and the wooden-legged man becomes entrapped in the mud and is captured.
The wooden-legged man, whose name is revealed to be Jonathan Small, is brought back to Baker Street, along with an iron box, which was found on the boat. Small proceeds to relay the story of the Agra treasure, which began when he was stationed as a fortress gatekeeper in India. Small explains that he was approached by three Arab guards and offered a share in a great fortune if he would help them murder the man who carried it. Small had agreed, and when the man, an emissary from a wealthy sheik, had arrived, the three Arabs had murdered the man as Small blocked his escape. The four conspirators had hidden the treasure, but soon after were arrested for the murder of the emissary.
Small had been sent to a penal colony on the Andaman Islands, where he had managed to befriend a native, Tonga, who became his loyal companion. Small had bribed two of the guards on the island, Sholto and Morstan (Mary’s father), into helping him escape in exchange for a share in the fortune. The two had agreed and Sholto left to bring back the treasure. After some time, it had become apparent to Small that Sholto has betrayed him, and he had escaped from the island with Tonga. After many years, Small had tracked down Sholto, and arrived just in time to see him die. After the death, Small had affixed the note which was found on the body, as a reference to himself and his three Arab companions. When he had returned to the Sholto estate, Tonga had murdered Bartholomew and the two had stolen the treasure.
Small concludes his narrative by revealing that in the course of the chase on the Thames, he had thrown the treasure overboard. Small is taken to prison, and Watson, who has come to love Mary Morstan, proposes to her.