| Director | Barry Levinson |
|---|---|
| Budget | $18 million |
| Box office | $63.7 million |
Following the closure of his old school in the countryside, a young John Watson is transferred to London's Brompton Academy, where Sherlock Holmes befriends him immediately. Holmes's mentors there include Rupert Waxflatter, an eccentric retired professor to whom the school has given a large attic space for his inventions, which include a flying machine. Waxflatter's niece Elizabeth Hardy and Holmes are in love.
Elsewhere in the city, a hooded figure with a blowpipe shoots Bentley Bobster and the Reverend Duncan Nesbitt with thorns that induce nightmarish hallucinations, causing their apparent suicides. Holmes brings his suspicions of foul play to Scotland Yard detective Lestrade, who rebuffs him.
After rival student Dudley, who is jealous of Holmes and Elizabeth, frames him for cheating on an exam, Holmes is expelled from Brompton. He has one last duel with Professor Rathe, the fencing instructor. While Holmes says goodbye to Watson, Waxflatter is shot with a thorn and stabs himself. Dying, he whispers the word "Eh-Tar" to Holmes.
Holmes, Watson and Elizabeth secretly investigate the murders, uncovering the existence of Rame-Tep, an ancient Egyptian cult of Osiris worshippers. The trio track the cult to a London paraffin warehouse and a secret underground wooden pyramid, where they interrupt the sacrifice of a young girl. The Rame-Tep shoot them with thorns and they escape to a cemetery to endure the hallucinations.
Back in Waxflatter's loft, Holmes and Watson find a drawing of six men, including the three victims and a fourth man, Chester Cragwitch, who is still alive. That night, Holmes and Watson go to see Cragwitch, who explains that in his youth, he and the other five men were in Egypt, where they looted an underground pyramid containing the tombs of five Egyptian princesses. The resulting protest was violently put down by the British Army. A local boy named Eh-Tar and his sister vowed to seek revenge for their parents' deaths in the protests and replace the bodies of the five princesses. As they return to the school, a chance remark by Watson causes Holmes to realize that Eh-Tar is none other than Professor Rathe.
Rathe and his sister, school nurse Mrs. Dribb, abduct Elizabeth to use as the final sacrifice. Using Waxflatter's flying machine, Holmes and Watson reach the warehouse just in time to rescue Elizabeth and burn the pyramid down. When Rathe tries to shoot Holmes, Elizabeth shields Holmes with her body and is mortally wounded. In a resulting duel, Rathe falls into the frozen River Thames. Holmes transfers to another school and Watson gives him an antique pipe that he bought during the investigations as a Christmas/farewell present.
An end-credits scene reveals that Rathe survived. Checking in at a hotel in Switzerland, he signs under a new name, "Moriarty", foreshadowing his role as Holmes' future nemesis.