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Indiana Jones and the Emperor's Tomb begins in the jungles of Ceylon, where Indiana Jones is searching for the idol of Kouru Watu. After retrieving the idol, Jones meets a Nazi named Albrecht Von Beck who also seeks it. Jones defeats Von Beck's henchmen and takes his leave while Von Beck is attacked by a giant albino crocodile. Back at school in New York City, Chinese official Marshall Kai Ti Chan and his female assistant Mei Ying inform Jones of the "Heart of the Dragon", a black pearl buried with the first emperor of China, Qin Shi Huangdi. The Heart is said to grant the wielder immense magical power, and Kai wants Jones to retrieve the it before it falls into the wrong hands. Mei Ying breaks open the Ceylon idol to find the first piece of the "Mirror of Dreams" inside it, an artifact that will help navigate through the Emperor's Tomb and reveal the entrance to Huangdi's crypt.
Jones flies to a castle in Prague to acquire the second piece of the Mirror, encountering a large number of Nazis. After obtaining the second piece he's knocked out by their leader, Von Beck, who had survived the crocodile attack (albeit hideously scarred and blind in his right eye). Von Beck then takes the two Mirror pieces and orders his subordinates to transport Jones to Istanbul where Von Beck intends to interrogate him. Jones wakes up in a prison cell in where Mei Ying appears and frees him. He is surprised to find that the Nazis, below Istanbul, have uncovered the ruins of Belisarius' sunken city in search for the final piece of the Mirror. Jones makes his way into the ruins and eventually falls into a sunken amphitheatre where he battles the Kraken guarding the final piece. After defeating the beast, Mei Ying reappears and tells him that Kai is actually the leader of the Black Dragon Triad, the most powerful crime organization in China. Kai had formed an alliance with the Nazis to find the Heart of the Dragon, but when Jones unwittingly secured the first piece of the Mirror, Kai decided to betray the Nazis in order to get the Heart for himself. Mei Ying teams up with Jones, both unaware that Kai's bodyguards have been listening in on their conversation.
Mei Ying and Jones goes to Hong Kong in order to infiltrate Kai's fortress. They begin at the Golden Lotus Opera House, where they wait for Wu Han, a character from Indiana Jones and the Temple of Doom to help them. When Mei Ying is kidnapped by Kai's men, Jones and Wu Han chase them down to the dock, where they see Mei Ying being taken into a submarine by Von Beck. The submarine heads to Kai's private island, and Wu Han and Jones follow in a junk.
After infiltrating a Nazi submarine base, Jones spies Von Beck and Kai arguing about their deal. They reach an agreement in which Von Beck can take the Heart to Adolf Hitler when Kai seizes control of China. Disguising himself as a Nazi, Jones makes his way to the peak of Penglai Mountain and the site of the Kai's Black Dragon Fortress where he finds Mei Ying guarded by the Feng twins, Kai's female bodyguards. After killing them, he falls down a shaft into the temple of Kong Tien where he fights evil spirits and finds a magical Chinese boomerang-like weapon called the Pa Cheng, the Dragon's Claw. Eventually he finds Kai assembling the Mirror of Dreams and sacrificing Mei Ying to Kong Tien. Attempting to rescue her, Jones disrupts the ritual, and Kai flees while Mei Ying is possessesed. Jones frees her and together, with the mirror, they venture to the Emperor's Tomb where he uses the mirror to cross various obstacles. He is however separated from Mei Ying and faces Von Beck who pursues him in a type of mining-tank, bent on getting rid of Jones once and for all. Von Beck is killed when his tank falls down a chasm, and Jones enters a portal to the Netherworld.
After crossing a short Netherworld-version of the Great Wall of China, Jones finally finds Huangdi's crypt and the body of Qin Shi Huangdi. When Jones takes the Heart of the Dragon, the emperor awakens but is nearly instantly killed by the souls of his victims. Unable to control the power of the Heart, Indy collapses while Kai, who suddenly shows up, grabs the pearl. Mei Ying likewise appears to help Jones, but is shortly afterwards seized by Kai's newfound powers. Kai also creates a shield to protect himself and summons a dragon to battle Jones, but Jones uses the Pa Cheng charged with mystical energy to penetrate Kai's shield and destroys the Heart. At the moment Kai loses his powers, spirits of his victims rise and mistake Kai for the first Emperor of China. Jones and Mei Ying flee as Kai is devoured by the dragon.
Back in Hong Kong, Jones gets to share some romantic time with Mei Ying, but Wu Han is quick to remind Jones that Lao Che has hired them to find the remains of Nurhachi, leading into the opening of Temple of Doom.