Watson, on holiday in the Lake District, meets the enigmatic Lady Frances Carfax, who is being haunted by the ghost of a horseman. Holmes decides to come up to join Watson, but by the time he arrives Lady Frances has vanished without trace. Holmes investigates and becomes very curious about the ghost.

Colonel James Damery calls on Holmes when the rich and beautiful Miss Violet Merville announces her engagement to Baron Gruner, a dangerous Austrian. Gruner has persuaded Violet that he is not a killer, and Holmes has to establish the truth and foil the powerful baron.

Holmes and Watson attempt to thwart the schemes of the infamous blackmailer Charles Augustus Milverton from blackmailing Lady Eva Blackwell. But things do not seem as easy as they do and Holmes must sacrifice his morality and his honourable career to stop Milverton from wrecking her marriage.

American heiress Henrietta Doran (known as Hatty) marries Lord St Simon, but she vanishes without trace on her wedding day, leaving London agog. Later, the police find her wedding dress in the Serpentine, a lake in a London park, with a note in the pocket of the dress. While investigating the case, Holmes suffers from nightmares, which he sees as a factor in the mystery.