In Egypt, circa 1290 BC, high priest Imhotep engages in an affair with Anck-su-Namun, the mistress of Pharaoh Seti, despite strict rules that other men are forbidden to touch her. When the Pharaoh discovers their tryst, Imhotep and Anck-su-Namun murder the monarch. Imhotep is dragged away by his priests before the Pharaoh's guards can discover his involvement; Anck-su-Namun then kills herself, intending for Imhotep to resurrect her. After Anck-su-Namun's burial, Imhotep breaks into her crypt and steals her corpse. He and his priests flee across the desert to Hamunaptra, the City of the Dead, where they begin the resurrection ceremony. However, they are caught by Seti's guards before the ritual could be completed, and Anck-su-Namun's soul is sent back to the Underworld. For their sacrilege, Imhotep's priests are mummified alive, and Imhotep himself is forced to endure the curse of Hom Dai: his tongue is cut out and he is buried alive with a swarm of flesh-eating scarabs. The ritual curses him to become an immortal walking plague if he were ever to be resurrected. He is buried under high security, sealed away in a sarcophagus below a statue of the Egyptian god Anubis, and kept under strict surveillance throughout the ages by the Medjai, descendants of Seti's palace guards. If Imhotep were ever to be released, the powers that made him immortal would allow him to unleash a wave of destruction and death upon the Earth.
In 1923, soldiers from the French Foreign Legion, led by American Rick O'Connell, make a final stand at Hamunaptra against an overwhelming force of Medjai warriors. The soldiers are massacred and O'Connell makes a final retreat inside the city, only to be cornered by a group of Medjai. However, they flee when Imhotep's evil presence manifests itself, leaving him to die in the desert.
In 1926, Cairo librarian and aspiring Egyptologist, Evelyn Carnahan is presented with an intricate box and map by her bumbling brother Jonathan, who says he found it in Thebes. The map seems to point the way to the lost city of Hamunaptra, where all of the wealth of Egypt was supposedly stored; however, the museum curator, Dr. Bey, dismisses Hamunaptra as a myth, and accidentally damages the map. Jonathan reveals he actually stole it from an American (revealed to be O'Connell), who is currently in prison, and may be able to tell more about Hamunaptra. Rick tells them that he knows the location of the city from his days in the Foreign Legion. He makes a deal with Evelyn to reveal the location of Hamunaptra, in exchange for Evelyn saving Rick from being hanged. Evelyn successfully negotiates his release from the prison warden by offering him 25% of the found treasure; however, the warden insist on coming along in order to protect his investment. They board a ship to start their expedition to the city, where they encounter a band of American treasure hunters led by the famed Egyptologist Dr. Allen Chamberlain, and guided by Beni Gabor, a cowardly former Legion soldier who served with Rick and also knows the location of the lost city.
During the journey, the boat is invaded by Medjai soldiers who are looking for Evelyn's box and the map. The expedition manages to fight them off, but the map is lost and the boat goes up in flames, forcing the entire party to go ashore. Rick, Evelyn and Jonathan are separated from the other treasure hunters and procure camels at a nearby market. Since Rick knows the way to the city, they arrive at Hamunaptra at the same time as the other party, but due to tensions between the two groups, they start exploring the city in separate locations. The Americans discover a chest between the legs of the statue of Anubis. They have it opened by several of their carriers, but the chest is booby-trapped and the carriers die from an acid spray. In the meanwhile, Evelyn is looking for the Book of Amun-Ra, a solid gold book supposedly capable of taking life away. Her team discovers a tomb buried directly below the statue of Anubis. Evelyn's box turns out to function as a key that opens the tomb; inside there is a sarcophagus. Suddenly, the prison warden runs by, screaming in pain. Unbeknownst to the rest, he had found a decorative scarab, but it contained a real scarab that entered his body and ate a way into his brain. The warden knocks himself into a wall and dies instantly.
After a quiet evening outside, Rick and Evelyn get in a romantic mood, when suddenly, both groups are attacked by the Medjai, led by a warrior named Ardeth Bay. Rick forces a stand-off by lighting a stick of dynamite and threatening to blow everyone up. Bay warns them of the evil buried in the city, and gives them one day to leave. His groups then ride out. Rather than heed his warning, the two expeditions continue to work on their respective projects. The sarcophagus is opened, and contains the gory remains of Imhotep. The team of Americans, meanwhile, open the chest, in spite of a warning on its lid that threatens to kill everyone who takes its contents. They discover the black Book of the Dead, accompanied by canopic jars carrying Anck-su-Namun's preserved organs; each of the Americans takes a jar as loot, while Dr. Chamberlain takes the book, but Beni flees the scene out of fear for the curse.
At night, Evelyn takes the Book of the Dead from the Americans' tent; her key also fits on it. She reads a page aloud, accidentally awakening Imhotep's mummified remains. Immediately, the first plague announces itself: a swarm of locusts invades the terrain, forcing everyone inside the city. The entire group is separated into smaller parties when a giant army of scarabs breaks loose, and eats everything in its path. One of the Americans gets lost, and is attacked by Imhotep, who takes his eyes and tongue while partially regenerating his body. Evelyn also encounters Imhotep, and he seems to recognize her as Anck-Su-Namun; however, Rick shoots him down before everyone flees the catacombs. They run into Ardeth and his group of Medjai warriors again. He berates them for resuccecting Imhotep, who will now bring along death and destruction. The only thing to do is flee the city, until a way can be found to kill him again. The entire group leaves, but Beni is left behind. He also encounters Imhotep, but successfully pleads for his life, and is allowed to become his slave.
Both groups return to Cairo. Rick and the Americans plan to leave Egypt, but Evelyn decides to stay, reasoning that releasing the curse was their fault, so they have the responsibility to stop Imhotep. That afternoon, the next plague announces itself: water turning into blood, signaling that Imhotep is nearby. The group deduces that Imhotep will go after the four men who took the Book of the Dead and the canopic jars. Beni has indeed taken Imhotep to Cairo, helping him trace the Americans. Rick and Jonathan track down the American whose eyes were stolen; they find his desiccated body, and Imhotep slowly regenerating his own. Rick tries to kill Imhotep but he is invulnerable to weapons; only the presence of a cat in the room startles him, and he flees in a dust storm. Rick returns to his quarters as the second plague starts: violent hailstorms ravage the city. He locks Evelyn in her room to keep her safe from Imhotep, ordering the remaining two Americans to stand guard while he and Jonathan leave to warn Dr. Chamberlain. The doctor's chamber is empty, but they witness Imhotep killing Dr. Chamberlain in the streets, taking the Black Book and releasing a swarm of flies. Imhotep proceeds to Evelyn, entering the room and consuming the body of the American on guard. He enters the sleeping Evelyn's bedroom through the keyhole by transforming into sand, and tries to kiss her. Rick, Jonathan and the remaining American enter, and scare him away by threatening him with a cat.
The group goes to the museum, hoping that the museum curator Dr. Bey may have some answers. They are astonished to find him together with Ardeth Bay. Dr. Bey reveals to also be a member of the secret society sworn to prevent Imhotep's resurrection (which is why he purposely tried to burn the map). He theorizes that Imhotep will fears cats (the guardians of the underworld) until he is fully immortal; he also thinks that Imhotep intends to resurrect Anck-su-Namun, using Evelyn's body to regenerate it. All of a sudden, a solar eclipse occurs, so they have to make haste. Evelyn hypothesizes that if the black Book of the Dead brought Imhotep back to life, the gold Book of Amun-Ra can kill the high priest once again. The group finds a tablet in the museum that describes the location of both books, and Evelyn deduces that the gold book must be buried beneath the statue of Horus. At that moment, a large group of natives, covered in boils and sores (the next plague) and under Imhotep's spell, surround the museum. The heroes leave the museum by car, but the remaining American is captured during the pursuit, and consumed by Imhotep. Finally cornered by his followers, the fully regenerated Imhotep offers Evelyn to come with him, in exchange for letting the others go. She agrees, but as they leave, Imhotep goes back on his words. Dr. Bey sacrifices his life by holding back the crowd of followers while the rest flee through the sewers.
Rick, Jonathan and Ardeth enlist the help of Winston Havlock, a desillusioned WWI fighter pilot, to fly them over to Hamunaptra. Imhotep returns to Hamunaptra in a sandstorm, carrying Evelyn and Beni, pursued by Rick's plane. Imhotep uses his powers to cause a huge sandstorm, but distracted by Evelyn, he only succeeds in letting the plane make an emergency crash landing, killing only Winston. Rick, Jonathan and Ardeth enter Hamunaptra and discover a new area ful of Hamunaptra's famed treasures. They quickly get into a battle with Imhotep's resurrected mummy priests, so they make their way to the statue of Horus, where they find the Book of Amun-Ra. However, when cornered by the priests, Ardeth sacrifices himself to allow Rick and Jonathan to escape. Imhotep, in the meanwhile, has resurrected the mummified remains of Anck-su-Namun and is preparing to sacrifice Evelyn, when Rick and Jonathan interfere. Rick frees Evelyn from a group of mummies, while Jonathan reads an inscription on the book in order to kill Imhotep; unfortunately, this only summons a group of mummified guards, who go after Rick, while Evelyn is attacked by the resurrected Anck-su-Namun. Jonathan succeeds in finishing the inscription, giving him command of the guards just before they kill Rick; he commands the guards to kill Anck-su-Namun. Imhotep turns his anger towards Rick, while Jonathan and Evelyn succeed in opening the Book of Amun-Ra. Imhotep is about to kill Rick when Evelyn recites the counter-curse. Imhotep's immortal soul is taken from him, and he becomes mortal. Rick fatally stabs him, and rapidly decaying into a mummy again, Imhotep leaves the world of the living, vowing revenge. Beni, who was secretly dragging treasure outside, accidentally sets off an ancient booby trap. As Hamunaptra begins to collapse into the sand, Rick, Evelyn and Jonathan race towards the exit, with Jonathan accidentally dropping the gold book. Beni remains behind, and is trapped and eaten by a swarm of flesh-eating scarabs. The heroes escape before Hamunaptra disappears in the sand. Ardeth, who has unexpectedly survived, waits for them outside andthanks them for their help. They ride off into the sunset on a pair of camels laden with Beni's treasure.