The story relates how a valuable diamond is stolen by an Englishman from the eye of an Indian idol. The Englishman, on his return to London, is pursued by three Indian priests in disguise whose object is to secure "The Moonstone" at all costs, as failing its recovery, the priests will lose caste. The Englishman, Hearncastle, is found drowned, presumably having been killed by the Indians. The diamond passes into possession of Franklin Blake, his friend. Blake is followed by a band of Indian magicians. He presents the diamond to his fiancée from whom it is stolen. A detective is called in. Another girl in love with Blake commits suicide and suspicion attaches to her, as she leaves a mysterious note for Blake. Subsequently, Blake finds the diamond in the possession of a money-lender. His fiancée, learning of the dead woman's attachment for Blake, quarrels with him. A doctor discovers that Blake walked in his sleep and took the diamond himself while in that state. The diamond was stolen from Blake while he was asleep and never recovered. The thief confessed and died, and Blake and his fiancée were reunited.