In 1912, boy scout Indiana Jones steals the Cross of Coronado, an ornamental cross belonging to Francisco Vásquez de Coronado, from grave robbers, believing it should be in a museum instead of a private collection, in the process using a whip, scarring his chin, and gaining his fear of snakes. Although he rescues the cross, the robbers tell the police that Indiana was the thief, and he is forced to return it, while his oblivious father, Henry Jones, is working on his research. One of the robbers, dressed very similarly to the future Indiana, gives him a fedora. In 1938, an adult Indiana is on the robbers' ship, the Coronado, off the Portuguese coast. A fight leaves the ship sunk and Indiana hanging on to the Cross and a life preserver. He is rescued and donates the Cross to Marcus Brody's museum.<p />
Indiana meets the wealthy Walter Donovan, who informs him that his father vanished while searching for a clue to the location of the Holy Grail, using an incomplete stone tablet as his guide. Indiana and Marcus travel to Venice to meet Dr. Elsa Schneider to retrace his father's footsteps, starting at the library where he was last seen. Indiana finds an "X" (inlaid in the floor) literally marking the spot, then smashes through the floor to ancient catacombs underneath, filled with oil several feet deep. Inside is the tomb of Sir Richard, a knight of the First Crusade, whose shield holds a complete version of the information on the tablet. The Brotherhood of the Cruciform Sword, a secretive and fanatical religious cult that protects the Holy Grail, set fire to the oil in the catacombs to kill Indiana and Elsa. Indiana overturns Richard's sarcophagus so that he and Elsa can take refuge inside from the flames, and emerge from a sewer grate in Venice outside the library. Indiana and Elsa commandeer a motorboat to escape, managing to fight off all but the cult's leader, Kazim, during the ensuing chase. Jones convinces Kazim that he is looking for his father, not the Grail, and Kazim reveals that his father is being held in Castle Brunwald near the Austrian-German border.<p />
Indiana finds his father, but they are betrayed by Schneider and Donovan, who worked with the Nazis to stage Henry's kidnapping, so that Indiana would solve the mystery of the Grail for them. Indiana and Henry escape together and travel to Berlin to retrieve Henry's diary, which contains all he has learned of the Grail, including clues to evade three booby traps. They arrive at a pro-Nazi book-burning rally, where a disguised Indiana corners Elsa and convinces her to return the diary to him, in the process bumping into Adolf Hitler, who assumes the diary is an autograph books and signs the first page. Indiana and Henry travel on an LZ-138 Zeppelin, which begins to turn around, letting Indiana realize the Nazis know they are on board. They escape the ship by taking an attached fighter plane, evading Nazi dogfighters. Henry accidentally shoots out the tailfin, and they crash land. They steal a car, causing one Nazi plane to be destroyed when it follows them through a tunnel. On a beach, Henry uses his umbrella to stir up a flock of seagulls. The seagulls cause numerous bird strikes on the second plane, crashing it. The Joneses meet up with Sallah and confront the Nazis, who have captured Brody. The Brotherhood of the Cruciform Sword also appears, attacking the Nazi caravan, but are defeated. Henry attempts to rescue Brody from the tank wherein he is being held, but is himself captured. Indiana jumps onto the tank and rescues the captives before it drives off a cliff, killing Donovan's aide, Colonel Vogel.<p />
The Joneses, Sallah, and Brody reach the Canyon of the Crescent Moon, in Hatay near Iskenderun, the site of the temple housing the Grail. The Nazis capture them in the temple and shoot Henry, forcing Indiana to retrieve the Grail, so as to heal his father's fatal wounds. Guided by the diary, Indiana circumvents the deadly booby traps, reaching a room where a knight of the First Crusade, kept alive by the power of the Grail, has hidden it amongst many false cups, while Donovan and Elsa follow. The knight informs them that, if they wish for the Grail, they must choose wisely for it, for while drinking from the true Grail will bring them everlasting life, a false Grail will take it from them. Schneider identifies a golden, bejeweled cup as the Grail, and Donovan impatiently drinks from it. Realizing the Grail is false, Donovan dies in a gruesome manner, aging rapidly into dust.<p />
Indiana picks out the true Grail, a plain cup with a gold interior, worthy of a humble carpenter (Jesus), and drinks from it without harm. Indiana fills the Grail with water and uses it to heal Henry. Despite a warning from the knight not to let the Grail go past the Great Seal in accordance with the Law of God, Elsa tries to leave with the Grail and the interior starts to collapse. She loses her balance at the edge of a newly-formed crevasse; despite Indiana's attempts to lift her, she greedily reaches for the Grail and falls into the abyss. Indiana loses his footing and finds himself in the same situation, with his father keeping him from following the same fate as Elsa. He also tries to get the Grail, until Henry says simply, "Indiana...Indiana...let it go." Realizing that this is the first time his father has properly referred to him by name (rather than condescedingly call him "Junior"), Indiana reluctantly obeys. The Grail and the old knight are left in the ruins as the Joneses, Brody, and Sallah escape the crumbling temple. Afterward, Henry reveals that "Indiana" was the family dog's name, much to Sallah's amusement, and that Indiana's real name is Henry Jones, Jr. All four then ride off into the sunset.<p />