One morning, Dr. James Mortimer pays a visit to consulting detective Sherlock Holmes and Dr. John H. Watson at 221B Baker Street. Mortimer is concerned by the mysterious death of his old friend Sir Charles Baskerville, which local folk attribute to the 200-year-old family curse: a gigantic phantom hound, a monstrous black beast with dripping jaws and glowing eyes reputed to have savaged his ancestors to death. Sir Charles lived in fear of the legend and died with a look of abject terror on his face. There was evidence of a desperate dash for safety, but far more frightening were the distinct footprints of an enormous hound close to the corpse.
Mortimer is also afraid for the new heir, Sir Henry Baskerville, who has been located in Canada and is coming to claim his inheritance. From the moment he arrives in London, odd things start to happen. Two of his boots go missing, anonymous warnings are delivered to his hotel and a bearded man is following him. It is beginning to look as if Sir Henry's life may be in danger too.
Sir Henry is about to take up residence at his ancestral home, Baskerville Hall on Dartmoor. Unable to leave London for the present, Holmes sends Watson down to Devon as his agent, with instructions to keep him fully informed of events, however trivial. The men have learned that a violent convict has escaped from the nearby prison and is still missing upon the moor. At Baskerville Hall, Watson encounters the bearded butler Barrymore and his wife, while the sound of a woman sobbing and the creak of aged floorboards rob him of his sleep.
The next day while out walking on the moor, he meets the eccentric archaeologist Stapleton, who lives at Merripit House with his beautiful sister, Beryl -- a love interest for Sir Henry. Stapleton points out the Grimpen Mire, a treacherous bog so deep it can devour a horse. Nearby are ruins of prehistoric stone dwellings. Then comes the sound of the baying of a hound.
An increasingly alarmed Watson and Sir Henry stalk a prowler who disappears into thin air at Baskerville Hall. Intruder or ghost? Finding false paneling, they entrap a startled Barrymore as he signals across the moor. He claims to be signalling his lover.
Watson and Sir Henry join Dr. and Mrs. Mortimer for dinner at Merripet House with the Stapletons. Dr. Mortimer's wife, who is fascinated by the occult, agrees to lead a séance; a terrifying vision of the Hound appears. Badly shaken, Watson and Sir Henry return to Baskerville Hall. The escaped convict Selden -- starved and desperate -- has broken into the kitchen. As Watson and Sir Henry give chase, they hear the eerie howling of a distant hound. Watson sees the outline of a stranger standing on the distant Tor, framed against the moon.
Alone but armed, Watson tracks the stranger to a circle of Neolithic huts, where he discovers to his fury that the stranger is none other than Sherlock Holmes. A cry of terror interrupts them. They race towards the sound and discover the body of Sir Henry, horribly mutilated, face downward on the moor. He has been savaged by an unknown beast. But, upon closer inspection, they realize it is not Sir Henry; it is the convict Selden, dressed in Sir Henry's clothes.
Back at Baskerville Hall, Holmes tells Mrs. Barrymore that her brother, Selden, is dead. She breaks down and confesses that she had been feeding him (hence Barrymore's signaling) and that she had given him Sir Henry's discarded clothes. It is obvious that he had been assumed to be Sir Henry in the attack.
Through a masterly combination of detection and deduction, Holmes tells Watson that he has identified the murderer as Stapleton, who is out to avenge his father, a disinherited Baskerville who died in poverty. However, they need to catch Stapleton red-handed if they are to deliver him to the hangman. Holmes also reveals that Beryl is not Stapleton's sister but his wife. Stapleton found it useful to use her as romantic bait to ensnare both Sir Henry and Sir Charles.
Together with Inspector Lestrade, Holmes and Watson stake out Stapleton's home as he entertains Sir Henry, who has no idea of Holmes's suspicions. He is disappointed to discover that Beryl is not at home. After dinner, Sir Henry leaves Merripit House and makes his way home on foot across the moor. In the gathering mist Stapleton releases the Hound, priming it with the scent of Sir Henry's stolen boot. The sight of the great demonic creature, eyes ablaze, is so terrifying that their nerve momentarily fails them and the animal streaks after its prey. A desperate chase ensues as Holmes and Watson race to save the unsuspecting Sir Henry. They almost arrive too late. The hound has attacked but before it goes in for the kill, they shoot it dead.
Back at Merripit House, Lestrade has detained a defiant and unrepentant Stapleton, who refuses to confess. Watson finds Beryl, bound and beaten to death. In the resultant furor, Stapleton shoots the angry Watson and makes a desperate escape. Holmes pursues Stapleton across the midnight moor, but Stapleton uses his knowledge of the treacherous terrain to lure the detective into the infamous Grimpen Mire. As Holmes is sucked into the bog, Stapleton gloats and is about to kill him when the wounded Watson lurches out of the fog and shoots him dead. Watson drags Holmes to safety.
Sir Henry will survive, Watson's wounds will heal and Holmes has solved his most difficult case yet.
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