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 causing her death. The two become bitter enemies and part ways. Borden begins a solo act while Cutter helps Angier launch his own career. In retaliation for his wife's death, Angier sabotages Borden's bullet catch trick and shoots off two of the latter's fingers. Borden, in turn, sabotages a performance of Angier's and later 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. Borden then approaches Root and explains that he has high leveraging power over Angier, causing him to act more and more arrogant. In return, 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, crippling him. 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, who supposedly built a machine for The Transported Man trick.
Angier realizes the diary is fraudulent but Tesla still manages to create a machine for him. However, instead of teleporting objects, Tesla's machine creates a duplicate of them a short distance away. Tesla is driven from 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. Borden reveals to Olivia that he never loved Sarah and that he loves her more. Disgusted by Borden's inhumanity over his wife's death and the two magicians' feud, Olivia leaves. In London, Angier debuts "The Real Transported Man" using Tesla's machine.
Borden witnesses Angier fall through a trapdoor and drown in a water tank. Borden is discovered by Cutter and turned over to the police. He is found guilty of murder and sentenced to death. Lord Caldlow, an aristocrat, offers to adopt Borden's soon-to-be-orphaned daughter, Jess, so she is not sent to the workhouses, in exchange for Borden's tricks. However, on meeting Caldlow, Borden realizes that it is Angier in disguise, come to gloat. When Cutter realizes that Angier is still alive, he is disgusted that Angier allowed Borden to be sentenced but agrees to help dispose of Tesla's machine. Borden is hanged for Angier's murder. Back at the theatre, Angier is shot by a stranger who reveals himself as Borden.
How each man performed the Transported Man act is revealed: "Alfred Borden" was an identity shared by a pair of identical twins; offstage when one was "Borden," the other was disguised as "Fallon". When Angier had shot off one twin's fingers, the other amputated his own fingers to maintain the disguise. The surviving twin loved Sarah while his brother had loved Olivia.
Meanwhile, when Angier used Tesla's machine, every performance created a new Angier, while the original drowned in a tank beneath the stage. Angier dies from his gunshot and drops his lantern, setting the theatre on fire. Borden picks up Jess at Cutter's workshop. In the burning theater, rows of tanks hold dead Angiers.
