In June 1897, English gentleman Rudolf Rassendyll (Granger) takes a fishing vacation in Ruritania, a small kingdom in the Balkans. While there, he is puzzled by the odd reactions of the natives to him. Rassendyll discovers why when he meets Colonel Zapt and Captain Fritz von Tarlenheim. Zapt introduces him to the soon-to-be-crowned king, Rudolf V, who turns out to be not only his distant relative, but also looks just like him (except for the Englishman's mustache). The king, surprised at first, takes a great liking to the Englishman, and invites him to stay at the royal hunting lodge.
They celebrate their acquaintance by drinking late into the night. Rudolf is particularly delighted with a bottle of wine given to him by his scheming half-brother, Duke Michael (Douglas), so he drinks it all himself, and he soon passes out. The next morning brings a disastrous discovery: the wine was drugged. Rudolf cannot be awakened, and if he cannot attend his coronation that day, Michael will try to assume the throne as Regent. It is revealed that Michael is bitter that, because his mother was not of royal blood, the younger Rudolf is the heir to the kingdom. Zapt is able to convince a reluctant Rassendyll to impersonate Rudolf for the ceremony.
Rassendyll meets Rudolf's betrothed, Princess Flavia (Kerr). She had always disliked her cousin Rudolf, but now finds him greatly changed, very much for the better. As they spend time together, they begin to fall in love.
With the coronation accomplished, Rassendyll returns to resume his real identity, only to find the king has been kidnapped by Rupert of Hentzau (Mason), Michael's charmingly amoral henchman. Rassendyll is forced to continue the impersonation while Zapt searches for Rudolf. Fortunately, Michael cannot denounce the masquerade without incriminating himself.
Help comes from an unexpected quarter. To be king, Michael must marry his cousin Flavia. Rupert sets a trap for Rassendyll and arrives with 2 other men to kill him. But before Rupert arrives, Antoinette de Mauban (Greer), Michael's jealous French mistress, slips in and reveals to Rassendyle that (1) it is a trap to kill him, and (2) that the king is being held in Michael's castle near Zenda and promises to help rescue him. Since Rudolf would be executed at the first sign of a rescue attempt, she proposes that one man swim the moat and hold off his would-be assassins, while loyal troops storm the castle. With the help of Antoinette and Captain Fritz von Tarlenheim, Rassendyll escapes
After meeting with Rupert where he offers Rassendyll 100,000 pounds to leave (and having Fritz and Col Zapt killed), Rassendyll, Fritz, and Col Zapt plan a rescue. Rassendyll decides that he is that man to swim the moat, over Zapt's strenuous objections.
Their carefully laid plans go awry when Michael finds Rupert trying to seduce his mistress. After Rupert kills him, a heartbroken Antoinette blurts out just enough to alert Rupert to danger. Rassendyll fights and kills the guards, but must engage in a prolonged duel with Rupert while at the same time trying to lower the drawbridge to let Zapt and his men inside. When he finally succeeds, Rupert flees.
Rudolf is restored to his throne. Rassendyll tries to persuade Flavia to leave with him, but her devotion to duty is too great, and their parting, while loving, is bittersweet.