Charlie Chan must stop a spy from destroying the Panama Canal, trapping a Navy fleet on its way to the Pacific after maneuvers in the Atlantic.

Among the suspects are novelist Clivedon Compton, matronly school teacher Miss Jennie Finch, sinister scientist Dr. Rudolph Grosser, café proprietor Manolo, singer Kathi Lenesch (real name Kathi von Tzardas), cigarette salesman Achmed Halide, government engineer Richard Cabot and government agent Godley.

Upon landing, Godley goes to a hat shop owned by Fu Yuen, alias Charlie Chan, to enlist the sleuth's help in unmasking the deadly spy known only as Reiner.

As the other suspects are murdered, one by one, first Compton, then Manolo, Chan learns that the canal's Miraflores locks are to be blown up at ten that night.

Chan then sequesters the suspects at the plant, forcing Miss Finch to expose herself as Reiner in order to escape death.