In Thebes, Egypt, 1290 BC, high priest Imhotep engages in an affair with Anck-su-Namun, the mistress of Pharaoh Seti I. When the Pharaoh discovers their tryst, Imhotep and Anck-su-Namun kill him. As Seti's guards arrive, Imhotep flees while Anck-su-Namun kills herself, intending for Imhotep to resurrect her. Imhotep and his priests steal her corpse and travel to Hamunaptra, the city of the dead, but the resurrection ritual is stopped by Seti's bodyguards, the Medjai. Imhotep's priests are all mummified alive, while Imhotep himself is sentenced to immortal agony, buried alive with flesh eating scarab beetles. Imhotep is sealed away in a sarcophagus at the feet of a statue of the Egyptian god Anubis, and kept under strict surveillance by the Medjai, since if Imhotep were ever to return, the entire world would be doomed.
In 1925, Jonathan Carnahan presents his sister Evelyn, a Cairo librarian and aspiring Egyptologist, an intricate box and map. After the pair discover the map leads to Hamunaptra, Jonathan reveals he stole it from an American adventurer, Rick O'Connell, who encountered the city while in the French Foreign Legion. Rick makes a deal with Evelyn to lead them there after she releases him from prison.
Rick leads Evelyn and her party to the city, where the group encounters a band of American treasure hunters guided by Rick's cowardly colleague Beni Gabor. Shortly after reaching Hamunaptra, the expeditions are then attacked by the Medjai, led by the warrior Ardeth Bay. Despite Ardith's warning of the city's evil, the two expeditions continue to excavate. Evelyn searches for the famous Book of the Living, a book made of pure gold. Instead of finding the book, however, she, Rick, and Jonathan stumble upon the statue of Anubis and the remains of Imhotep buried underneath. The team of Americans, meanwhile, discover the black Book of the Dead, accompanied by canopic jars carrying Anck-su-Namun's preserved organs.
At night, Evelyn takes the Book of the Dead and reads a page aloud, accidentally awakening Imhotep. The expeditions return to Cairo, but Imhotep follows them with the help of Beni. Imhotep returns to full strength by killing the Americans, and brings the 10 plagues back to Egypt. Seeking a way to stop Imhotep, Rick, Evelyn and Jonathan meet Ardeth at a museum. Ardeth hypothesizes that Imhotep wants to resurrect his lover again and will do so by sacrificing Evelyn. Evelyn muses that if the Book of the Dead brought Imhotep back to life, the Book of the Living can kill him again, and deduces the book's whereabouts. Imhotep corners the group with an army of slaves. Evelyn agrees to accompany Imhotep if he spares the lives of the rest of the group.
Imhotep, Evelyn and Beni return to Hamunaptra, pursued by Rick, Jonathan, and Ardeth. Imhotep prepares to sacrifice Evelyn, but she is rescued after an intense battle with Imhotep's mummified priests. When Evelyn reads from the Book of Amun-Ra, Imhotep becomes mortal again and Rick forces him into the River of Death. Rapidly decaying, Imhotep leaves the world of the living, vowing revenge. While looting treasure from the pyramid, Beni accidentally sets off an ancient booby trap and is trapped by a swarm of flesh-eating scarabs as Hamunaptra collapses into the sand. Ardeth rides away as Rick and Evelyn kiss and, with Jonathan, ride off into the sunset on a pair of camels laden with Beni's treasure.