The Nazis have just invaded and are now occupying another Western European town in an Allied country, the Nazi District Commadant being Major Erich von Keller (Walter Slezak). Like other such occupied towns, the Nazis are keeping it a supposed free city in return for citizen cooperation. Some of the town's leading citizens, such as Mayor Henry Manville (Thurston Hall) and the railway station master George Lambert (George Sanders), encourage that citizen cooperation outwardly to maintain peace, while such persons are able to profit individually in being in von Keller's proverbial back pocket. Paul Martin (Kent Smith), a railway switch-man and George's best friend, has gone even further by befriending occupying German soldiers. On the other side, the school headmaster, well-respected Professor Sorel (Philip Merivale), and young schoolteacher Louise Martin (Maureen O'Hara), Paul's sister and George's fiancée, openly but quietly resist although do not totally defy Nazi orders. Louise's fellow schoolteacher, middle-aged Albert Lory (Charles Laughton), is a timid man, his self-admitted cowardice exacerbated by his overbearing mother, Emma Lory (Una O'Connor), coddling him, she in return expecting that he never leave her. Albert is secretly in love with Louise, which most in town know, it being more of a joke to them than anything as they know he will never admit such in his cowardice. Someone or some faction in town has been clandestinely printing and distributing anti-Nazi leaflets. In addition, an act of sabotage at the railway yard which was intended to thwart the Nazis resulted in two German soldiers being killed. As such, von Keller is determined to find out the person or people behind these acts. If he is unable, he will not hesitate to imprison and execute innocent people to make them examples to the townsfolk. When the supposed saboteur is discovered and shot by the Nazis, Albert gets caught in the middle, with his life on the line. In this situation, the townsfolk may get a true picture of what it means to be a coward or a hero.