In 1868, rumors of a sea monster attacking ships in the Pacific Ocean have created apprehension and fear among sailors, disrupting shipping lanes. The U. S. government invites Professor Pierre M. Aronnax (Paul Lukas) and his assistant, Conseil (Peter Lorre), to join an expedition to prove or disprove the monster's existence. On board the armed frigate with them is the cocky master harpooner Ned Land (Kirk Douglas).
After months of searching, the "monster" is spotted after another merchant ship nearby explodes and sinks. After the warship fires its heavy cannons, the monster turns and attacks the frigate, crippling it. Ned and Aronnax are thrown overboard, as is a lifeboat, and Conseil jumps in after Aronnax to save him. Now helpless, the frigate drifts silently and no one aboard answers when the overboard passengers cry out for help.
The three drift in the ocean, eventually coming upon a strange-looking metal vessel. They realize the "monster" is actually a man-made "submerging boat" that appears deserted. Inside, they find a large viewing port amidships and watch a strange underwater funeral procession. Ned, Aronnax and Conseil are spotted, and as they attempt to leave in their lifeboat, the crew returns to their submarine and capture the three castaways. The captain introduces himself as Nemo (James Mason), master of the Nautilus. He returns Ned and Conseil to the deck, while offering Aronnax, whose name he recognizes from Aronnax's scientific work and research, the chance to stay. When Nemo discovers that Aronnax is willing to die with his companions, he finds out what he needed to know and allows Ned and Conseil to stay aboard.
Over the next several weeks, Captain Nemo shows Ned, Aronnax and Conseil around his submarine from its power station (an early type of atomic reactor which powers the sub), and the various ways the sub runs. Nemo allows his three "guests" to come and go around the Nautilus, but forbids them from trying to escape. Nemo takes the Nautilus on a series of adventures to various places in the Pacific and Aronnaux is both impressed and unsettled by Nemo's free-spirited thoughts of the world and places and islands they visit to gather food and supplies for the crew. Ned makes friends with a sea lion pet of Nemo's whom he spends most of his time with while in his cabin and wondering through the submarine. Nemo takes Aronnax to the penal colony island of Rura Penthe.
Nemo reveals he was once a prisoner there, as were many of his crew. The prisoners are loading an ammunition ship. That evening, the Nautilus rams and sinks the ship at sea, destroying its cargo and killing all its crew. An anguished Nemo tells Arronax that his actions have saved thousands from death in war; he also discloses that this "hated nation" tortured his wife and son to death while attempting to force from him the secrets of his advanced work. While the crew repair some damage to the Nautilus' rudder caused by the sinking of the merchant ship, Ned and Conseil sneak into Nemo's cabin and discover the coordinates of Nemo's secret base, a small island called Vulcania. After writing down the coordinates and sneaking out of the room, Ned writes out and releases several messages in bottles containing the island's isolated location, hoping somebody will find and free them from captivity.
One day while off the coast of New Guinea, the Nautilus becomes stranded on a reef. Ned is surprised when Nemo allows him to go ashore with Conseil unescorted, ostensibly to collect wildlife specimens. Ned goes off alone to explore avenues of escape. While kneeling at a pool to drink some water, he sees a number of human skulls on stakes. Realizing his danger, Ned runs for his life and rejoins Conseil as they are chased back to the Nautilus by cannibal natives. Despite remaining aground, Nemo is unconcerned, and the cannibals are repelled from the ship by electrical charges through the outer hull. Nemo is furious with Ned for not following his orders to stay on the beach and confines him to the submarine's brig.
Just then, a warship approaches, firing on the Nautilus. After a cannon shot hits the submarine, it slides off the reef and down into the depths, where it attracts the attention of a giant squid. An electric hull charge fails to repel the creature, so Nemo and his men surface during a violent storm to dislodge the beast. Nemo is quickly caught in one of the squid's tentacles. Ned, having escaped from captivity during the struggle, harpoons the creature, killing it, and jumps to Nemo's rescue, saving his captor from drowning as the dead squid sinks away. As a result, Nemo has a change of heart and decides to make peace with the outside world. As the Nautilus nears Vulcania, Nemo finds the island surrounded by warships, whose marines are converging on his hidden base in an interior lagoon.
Nemo navigates the Nautilus through an underwater channel to the lagoon where his base it. As Nemo goes ashore alone, armed marines appear on the ridge and attack. Ned attempts to identify himself as the author of the bottled messages, but they do not appear to hear him. Aronnax realizes this and becomes furious at Ned, recognizing that Nemo will soon destroy all evidence of his discoveries. Nemo triggers a time bomb in his large complex, but is badly wounded from a rifle bullet to his back while returning to the Nautilus. After haphazardly navigating the submarine away from Vulcania through the underwater channel, Nemo announces he will be "taking the Nautilus down for the last time". The First Mate and the rest of Nemo's crew declare they will accompany their captain in death. Aronnax, Conseil, and Ned are confined to their cabins.
The Nautilus' crew also retreat to their cabins at Nemo's instructions. Ned breaks loose and manages to surface the Nautilus, hitting a reef in the process, causing the submarine to begin flooding. Ned soon fights with the First Mate, but manages to knock him out and leaves him behind. Meanwhile, Nemo staggers to his grand salon's viewing port, and as he looks into the depths of his beloved blue ocean he succumbs to his fatal gunshot wound. As Ned frees Aronnax and Conseil from their quarters, Aronnax tries to retrieve his journal, which contains a full account of their voyage, but the urgency of their escape obliges Ned to knock him unconscious and carry him out.
From a safe distance away aboard the Nautilus' lifeboat skiff, Ted, Aronnaux, Conseil and Nemo's pet sea lion witness Vulcania destroyed by an enormous atomic-like explosion, and Ned apologizes to Aronnax for hitting him. As the now adrift Nautilus is swamped by the tsunami waves caused by the explosions, it disappears beneath the waves, as Nemo's last words to Aronnax echo: "There is hope for the future. And when the world is ready for a new and better life, all this will someday come to pass, in God's good time"..