The story opens in Monument Valley, Utah, in 1912. A troop of Boy Scouts are exploring the area.
Scout Master: Dismount!
One of the Scouts, Indiana Jones, finds a cave where where a party finds the cross of Coronado, a priceless Spanish American artifact.
Boy Scout: What are you gonna do?
Young Indy: I dont know, but I'll think of something!
The party is led by a mercenary wearing a fedora and leather jacket.
Fedora: Dig with your hands, not with your mouth.
Indy, believing it belongs in a museum, takes it and is pursued, attempting to escape by horseback. He is followed by the mercenaries in autos, but boards a circus train to elude them.
While on the train, he crawls through a car full of snakes (thereby providing the backstory for his reptilophobia) and then finds himself in a car with a lion. He escapes by using a bullwhip he finds hanging on the wall, in which his first attempt backlashes and gives him a cut on his chin (explaining the origin of his scar, a real scar borne by actor Harrison Ford).
After a few more dangerous encounters, including a near castration by the horn of a rhinoceros annoyed by the tussle on his roof, he is surrounded by the men.
Fedora: You got heart, kid, but that belongs to me.
Young Indy: It belongs to Coronado.
Fedora: Coronado's dead, and so are all of his grandchildren!
Young Indy: This should be in a museum!
Indy manages to escape using a Magician's box and gets the cross home.
His father, Professor Henry Jones, is busy working on a drawing that looks like a stained glass window. Indy excitedly tries to tell his father about it . . .
Young Indy: Dad...!
Young Indy: I have to show you something!
Henry: It can wait. Count to twenty.
Young Indy: No, Dad, I-!
Young Indy: One, two, three, f...
Henry: In Greek.
Young Indy: [rolls his eyes] Ana, theo, thea...
Moments later a fellow scout whom Indy had sent for the Sheriff when he discovered the illegal dig returns with the lawman; but he is dismayed to find that the burly businessman wearing a panama hat who had hired the mercenaries had also bought the law, and Indy is forced to surrender the cross to the looters.
Fedora: You lost today, kid. But that doesn't mean you have to like it.
He puts the fedora on the boys head.
As Indy smiles the scene fades and the scene changes to 1938 aboard a freighter in a violent Atlantic storm. Indy has tracked down the cross, but is again confronted by the man in the panama hat and his henchmen. He grabs the artifact, fights off the crew and dives into the ocean scant seconds before a massive wave collapses the ship's funnel, causing it to fall onto a load of explosives. As Indy grabs a life preserver from the wreck, he sees the panama hat floating by. As the hulk of the ship sinks, the name is visible on the bow: Coronado.
Indy returns to his university and is giving a lecture in class.
Indiana: Archeology is the search for fact, not truth. If it's truth you're interested in, Dr. Tyree's Philosophy class is right down the hall. So forget any ideas you've got about lost cities, exotic travel, and digging up the world. We do not follow maps to buried treasure, and "X" never, ever marks the spot.
Indy gives the artifact Marcus Brody for the museum, then goes to his office where he is surrounded by a phalanx of students.
His secretary Irene gives him a ream of papers to be graded as well as phone messages and a brown paper package from Venice, which he puts in his pocket. After sitting for a moment in his artifact cluttered office, he sneaks out through his window but is greeted by three men who step from a sinister black sedan.
They ask him to accompany them to what seems to be an elegant penthouse apartment in an unnamed city. This is the home of Walter Donovan, a generous donator to the museum.
Donovan: I trust your trip down was comfortable, Dr Jones. My men didn't alarm you, I hope.
Donovan is apparently an oil magnate whose drilling team has uncovered fragment of a stone marker dating to the 12th century.
The marker is read by Indy, and to his surprise it details "the cup that holds the blood of Jesus Christ" - the Holy Grail, whose waters can grant immortality. Donovan's project leader has deduced that a second marker, left behind by a knight who had found the Grail, is somewhere in Venice, but a major snag has occurred, as the project leader and all his research have vanished, to the concern of his assistant, Doctor Elsa Schneider.
Donovan: Find the man and you'll find the Grail.
Indiana: You've got the wrong Jones, Mr. Donovan. Why don't you try my father?
Donovan: We already have. Your father is the man who has disappeared.
To Indy's surprise, his father is Donovan's project leader, and when Indy and Marcus find Henry's house ransacked and his mail opened.
Indy suddenly remembers the package he got from Venice - his dad's diary, in which is all his father's research on the Grail.
Brody: The search for the Grail is the search for the divine in all of us. But if you want facts, Indy, I've none to give you. At my age, I'm prepared to take a few things on faith.
Indy and Marcus fly to Venice, where Donovan has arranged apartments for them, and they meet with Schneider.
Elsa: Dr. Jones?
Elsa: I knew it was you, you have your father's eyes.
Indiana: And my mother's ears but the rest belongs to you.
Elsa: It looks like the best parts have already been spoken for.
She gives them a written note by Henry that contains only the Roman numerals for three, seven, and ten, then the group goes to where Henry disappeared, the Venice library, which was once a church in ancient Roman times.
A glass painting dating from the sacking of Byzantium gives Indy a clue that the library is the tomb of the knight.
Finding a hidden passage in a Venetian library . . .
Indiana: "X" marks the spot.
Indy pries open the floor and finds a network of tunnels.
Exploring the tunnel with Elsa, they pass a wall painting of ancient antiquities.
Elsa: What's this?
Indiana: Ark of the Covenant.
Elsa: Are you sure?
Indiana: Pretty sure.
Indiana: Petroleum... I should stick a well down here and retire.
Indy finds an ancient casket and a knight's shield, the second marker.
However, Marcus is slugged by members of a cult sworn to preventing discovery of the Grail, and who have followed Indy from the States.
The cult sets fire to the petroleum in the tunnels but Indy and Elsa escape through the city sewers.
Indy and Elsa are pursued by the cultists, in speedboats.
Indiana: Are you crazy? Don't go between them!
Elsa: Go between them! Are you crazy?
The first boat is crushed by the large ships.
Indy corners the group's leader and learns from him that Henry is held in a castle in Germany.
Indiana: [shouting, as the boat is being chopped up by a propeller] Why are you trying to kill us?
Kazim: Because you are looking for the Holy Grail!
Indiana: My *father* was looking for the Holy Grail! Did you kill him too?
Indiana: Where is he? Talk or you're dead! Dammit tell me! Tell me!
Kazim: If you don't let go Dr. Jones, we'll both die!
Indiana: Then we'll die!
Kazim: My soul is prepared! How's yours?
Later, after drying out, Indy arranges for Marcus to meet Sallah to begin finding the Grail while he and Elsa go after his father.
He finds that his room and Elsa's have been ransacked.
Elsa: My room.
Indiana: Mine too.
Elsa: What were they looking for?
Elsa: The Grail Diary?
Indiana: Uh huh.
Elsa: You had it? You didn't trust me?
Indiana: I didn't know you. At least I let you tag along.
Elsa: Oh yes, give them a flower and they'll follow you anywhere.
Indiana: Knock it off, you're not mad.
Indiana: No, you like the way I do things.
Elsa: You're lucky I don't do things the same way. You'd still be standing at the Venice Pier.
Indiana: What do you think is going on here? Since I've met you I've nearly been incinerated, drowned, shot at, and chopped into fish bait. We're caught in the middle of something sinister here. My guess is dad found out more than he was looking for and until I am sure, I am going to continue to do things the way I think they should be done.
Indiana Kisses Elsa.
Elsa: How dare you kiss me.
Elsa Kisses Indiana.
Indiana: Leave me alone, I don't like fast women.
Elsa: [while nibbling on Indiana's ear] And I hate arrogant men.
Indiana: [after they both fall into bed, kissing] Ahh, Venice.
The two drive to the German castle, Indy poses as a Scottish Lord.
Butler: [answering door] Yes?
Indiana: [In Scottish accent] Not before time! did you intend to leave us standing on the doorstep all day? We're drenched!
He sneezes in the butler's face.
Indiana: Now look, I've gone and caught a sniffle.
Butler: Are you expected?
Indiana: Don't take that tone with me my good man! Now buttle off and tell Baron Brunwald that Lord Clarence McDonald and his lovely assistant are here to view the tapestries.
Indiana: The old man is dense, this is a castle isn't it? There are tapestries.
Butler: This is a castle and we have many tapestries, and if you are a Scottish lord then I am Mickey Mouse!
Indiana Jones: How dare he?
After knocking out the butler, they find Nazis in a planning room.
Indiana: Nazis. I hate these guys.
Indy swings from his bullwhip, crashing into a window of another room.
His father breaks a vase over Indy's head. Indy has found Henry.
Indiana: Yes, sir.
Henry: It *is* you, Junior.
Indiana: Don't call me that. *Please*.
Henry seems more distraught over breaking a valuable vase than Indy's head injury, but he's relieved to discover the vase is a fake.
They are quickly held at gunpoint by Nazis, but Indy manages to take the leader's gun and shoots them down. However, they run into another German officer Vogel holding a gun to Elsa.
Vogel: Throw down the gun or the girl will die.
Henry: But she's one of them.
Elsa: Indy, please!
Henry: She's a Nazi.
Henry: Trust me.
Elsa: Indy, help!
Vogel: I will kill her!
Henry: Oh yeah? Go ahead.
Indiana: No! Don't shoot!
Henry: Don't worry. He won't.
Elsa: Indy, please do what he says!
Henry: And don't listen to her.
Vogel: Enough! She dies!
Indiana: Wait! Wait.
Indy tosses over the gun. Vogel lets Elsa go and she runs right into Indy's arms.
Elsa: I'm sorry.
Indiana: Don't be.
Elsa takes the grail diary from Indy's pocket, smiles, then hands it to Vogel.
Elsa: But you should have listened to your father.
They are taken into another room at gunpoint.
Indiana: She ransacked her own room, and I fell for it! . . . How did you know she was a Nazi?
Henry: She talks in her sleep. . . Well, I didn't trust her. Why did you?
Donovan: Because he didn't take my advice. Didn't I tell you not to trust anyone, Dr. Jones?
To both men's horror, they find that the string-puller in this whole affair is Walter Donovan.
Henry: I misjudged you, Walter. I knew you would sell your mother for an Etruscan vase. But I didn't know you would sell out your country and your soul... to the slime of humanity.
Donovan discovers there are pages missing from the book containing a map with no names.
Elsa: It's perfectly obvious where the pages are. He's given them to Marcus Brody.
Henry: Marcus? You didn't drag poor Marcus along did you? He's not up to the challenge.
Donovan: He sticks out like a sore thumb. We'll find him.
Indiana: The hell you will. He's got a two day head start on you, which is more than he needs. Brody's got friends in every town and village from here to the Sudan, he speaks a dozen languages, knows every local custom, he'll blend in, disappear, you'll never see him again. With any luck, he's got the grail already.