As London prepares for Christmas, newspapers report the theft of a near-priceless gemstone, the "Blue Carbuncle", from the Countess of Morcar's hotel suite. The police arrest John Horner, a plumber with a criminal record who was in the Countess's room repairing a fireplace grate.

Meanwhile, at 221B Baker Street, Dr Watson finds Sherlock Holmes contemplating a battered old hat brought to him by Peterson, a commissionaire who seeks Holmes's help in returning it and a Christmas goose to their rightful owners after he found them dropped in the street during a scuffle. A nametag on the goose reading "Henry Baker" is of little assistance as the name is a very common one. Ultimately, Peterson takes the goose home for dinner while Holmes keeps the hat to study as an intellectual exercise. Wonderful detective work ensues and Sherlock finally solves each problem and apparent conundrum in his usual way.