In 1936, archaeologist Indiana Jones braves an ancient booby-trapped temple in Peru and retrieves a golden idol. He is confronted by rival archaeologist René Belloq and the indigenous Hovito people. Surrounded and outnumbered, Jones surrenders the idol to Belloq and escapes aboard a waiting floatplane.
Jones returns to his teaching position at Marshall College, where he is interviewed by two Army Intelligence agents. They inform Jones that the Nazis are searching for his old mentor, Abner Ravenwood, under whom Jones studied at the University of Chicago. The Nazis know that Ravenwood is the leading expert on the ancient city of Tanis in Egypt, and that he possesses the headpiece of an ancient Egyptian object known as "the Staff of Ra". Jones deduces that the Nazis are searching for the Ark of the Covenant — the Nazis believe that if they acquire the Ark, their armies will become invincible. The Staff of Ra (used to project a beam of sunlight on a building in a diorama of the city) is the key to finding the Well of Souls, a secret chamber in Tanis, Egypt, in which the Ark is buried.
The agents authorize Jones to recover the Ark to prevent the Nazis from obtaining it. He travels to Nepal and discovers that Ravenwood has died, and the headpiece is in the possession of Ravenwood's daughter Marion. Jones visits Marion at her tavern, where she reveals her bitter feelings toward him from a previous romantic affair. She physically rebuffs his offer to buy the headpiece, and Jones leaves. Shortly after, a group of thugs arrive with their Nazi commander Arnold Toht. Toht threatens Marion to get the headpiece but Jones returns to the bar and fights the Nazis to save Marion. During the fight, the bar is set ablaze and the headpiece lands in the flames. Toht severely burns his hand trying to take the hot headpiece and flees the tavern screaming in agony. Jones and Marion escape with the headpiece, and Marion decides to accompany Jones in his search for the Ark so he can repay his debt to her.
The pair travels to Cairo, where they meet up with Jones' friend and skilled digger Sallah. Sallah informs them that Belloq and the Nazis are digging for the Well of Souls with a replica of the headpiece (created from the scar on Toht's hand). They quickly realize the Nazi headpiece is incomplete and that the Nazis are digging in the wrong place. The Nazis kidnap Marion and it appears to Jones that she is killed in an exploding truck. After a confrontation with Belloq in a local bar, Jones and Sallah infiltrate the Nazi dig site and use their staff to correctly locate the Ark. Jones discovers Marion is alive when he finds her bound and gagged in a tent. He refuses to release her out of fear of alerting the Nazis. Jones, Sallah, and a small group of diggers unearth the Well of Souls and acquire the Ark. Belloq and Nazi officer Colonel Dietrich arrive and seize the Ark from Jones, throwing Marion into the Well of Souls with him before sealing it back up. Jones and Marion escape to a local airstrip, where Jones has a fistfight with a Nazi mechanic and destroys the flying wing that was to transport the Ark to Berlin. The panicked Nazis remove the Ark in a truck and set off for Cairo, but Jones catches them and retakes it. He makes arrangements to take the Ark to London aboard a tramp steamer.
The next day, a Nazi U-boat appears and intercepts the ship. Belloq and Dietrich seize the Ark and Marion but cannot locate Jones, who stows away aboard the U-boat and travels with them to an island in the Aegean Sea. Once there, Belloq plans to test the power of the Ark before presenting it to Hitler. Jones reveals himself and threatens to destroy the Ark with an RPG-2, but Belloq calls his bluff and Jones surrenders rather than destroy such an important historical artifact and kill Marion in the process. The Nazis take Jones and Marion to an area where the Ark will be opened and tie them to a post to observe. Belloq, dressed as an Israelite kohen gadol, performs a ceremonial opening of the Ark and finds it full of sand. Ghosts emerge from the Ark, destroying the equipment the Nazis are using to film the opening, and Jones tells Marion to close her eyes and not look. Belloq and the others look on in astonishment as the ghosts are suddenly revealed to be angels of death. A vortex of flame forms above the Ark and shoots bolts of fiery energy into the gathered Nazi soldiers, killing them all. Belloq, Toht and Dietrich all scream in terror as the Ark turns its fury on them: Dietrich's head shrivels up, Toht's face is melted off his skull and Belloq's head explodes. Flames then engulf the remains of the doomed assembly, save for Jones and Marion, and the pillar of fire rises into the sky. The Ark's lid is blasted high into the air before dropping back down onto the Ark and sealing it. Jones and Marion find their ropes burned off and embrace.
In Washington, D.C., the Army Intelligence agents inform Jones and Marcus Brody that the Ark is someplace safe and will be studied by "top men". The Ark is then shown being stored in a giant government warehouse among countless similar crates.