(Because the film has a very complicated plot and features many characters, the events will be told mostly in chronological order to render the plot clearer, rather than strictly adhering to the order we see in the film.)
General Sternwood has two daughters: the elder one is Vivian (Lauren Bacall) and the younger one is Carmen, who is a carefree, childish and problematic young woman.
General Sternwood has a man named Sean Regan working for him. With the help of Sean, the general has made a man named Joe Brody leave Carmen alone, by giving him 5.000 Dollars.
Carmen loves Sean but Sean loves the wife of a man named Eddie Mars, so he refuses Carmens advances. One day, Carmen kills Sean when she is drunk because of her unrequited love. Eddie hides Seans body. He then makes up the story that Sean and his wife have run away together and nobody sees Sean after that day. To support this story, he actually makes his own wife go away and start living in a remote place. Even the general doesnt know Seans whereabouts and wonders why he has left all of a sudden. Eddie then proceeds to blackmail Vivian for Carmens murder. As a way of eliciting money from Vivian, Eddie makes her win big money at his gambling house with cheats, and then he takes all the money from her.
Carmens troublesome adventures are not over, though. A man named Arthur Gwynn Geiger blackmails General Sternwood to take the gambling debts of Carmen. The general hires Philip Marlowe (Humphrey Bogart) to get rid of Geigers blackmail. Vivian talks to Marlowe, thinking that her father has actually hired him to find Sean Regan. Afraid that Carmen may get into trouble, she tries to take words from Marlowes mouth about his inquiry. But she learns that her father has not actually hired Marlowe about Sean.
Marlowe goes to Geigers so-called antique books shop and sees a woman named Agnes, who makes it impossible for him to talk to Geiger. Then Marlowe waits at the bookshop across the street until the evening and follows Geiger and his right arm Carol Lundgren to Geigers house. Before Marlowe gets in the house, however, important things happen. Owen Taylor, driver for the Sternwoods, is in love with Carmen. He goes to Geigers house with her and kills Geiger for her. A secret camera, however, takes Carmens photo just at the moment of the murder. Owen then takes the film from the hidden camera, gets in the car and goes away. Joe Brody, also present that night, follows Owen, takes the film from him to blackmail Carmen, (and most probably) kills Owen and pushes his car in the water.
When Marlowe gets in Geigers house, he sees Carmen with the dead body of Gaiger lying on the ground. Marlowe takes Carmen home and tells Vivian to say that Carmen has been home all night if asked by anyone. When he goes back to Geigers house, he sees that his dead body has been taken away.
Later, Owens dead body is found in the car in the water. He has been killed before falling into the water. Marlowe learns from Vivian that Owen was interested in Carmen. Vivian then tells Marlowe that somebody is blackmailing her for Carmens photo taken at the night of Geigers murder. The blackmailer, who wants 5.000 Dollars, is actually Agnes. It is Joe Brody that makes her blackmail Vivian. Vivian tells Marlowe that she can take the money from Eddie.
When Marlowe meets with Carmen once again at Geigers house, she tells him that it was Joe who took her photo that night. Eddie comes along and tries to scare Marlowe out of his inquiries.
Later, Marlowe finds Joe Brody and questions him about Geiger. Agnes and Vivian are also at his house. Carmen comes along with a gun and threatens to kill Joe if he doesnt give her the photo. Carmen takes the photo and she leaves with Vivian. Then the doorbell rings again and somebody kills Joe, then escapes. Marlowe catches the man, who turns out to be Carol (Geigers right arm), who thinks that it was Joe who killed Geiger. Marlowe and Carol then go to Geigers house. Marlowe calls his friend Bernie, who comes and takes Carol away for his murder.
Marlowe meets Vivian, who gives him money to close the case, but Marlowe sees behind this and does not want to quit his inquiries. He has to solve the Sean Regan issue.
A man named Harry Jones tries to sell Marlowe the name of the place where Sean can be found. The money is to be given to Agnes, who has seduced Harry before. Later, one of Eddies men, Canino, kills Harry, because the information he has given to Marlowe will reveal Eddies secret about Sean.
Marlowe meets with Agnes. She tells him that she and Joe have seen Eddies wife and Canino together and followed them. She gives Marlowe the address for 200 Dollars.
Marlowe goes to that address and is knocked unconscious by two men. When he wakes up, he is tied and Eddies wife is there. Marlowe learns the truth about Sean Regan: He did not run away with Eddies wife, he was already dead and it is only Eddies wife who is hiding away. The wife tries to defend Eddie, saying that it wasnt him who killed Sean. Marlowe tells her that Eddie is a blackmailer and she goes away. Vivian unties Marlowe and he kills Canino.
Marlowe calls Eddie to meet with him at his house. Eddie comes with a lot of men but he enters the house alone. Marlowe confronts him with a gun and makes him confess his bad deeds. He drives him out of the house and Eddies men outside, thinking that the one getting out of the house is Marlowe, shoot Eddie. The men leave, thinking they have done their duty.
Marlowe calls Bernie again and tells him that it was Eddie who killed Sean Regan. By saying this, he actually saves Carmen from arrestment. But he tells Vivian that she should take Carmen away from here and should try to reform her. Vivian understand that this means a separation between herself and Marlowe, who are by now very much interested in each other. The film ends vaguely about the future of the two lovers.