In Mystery of the Wax Museum, Ivan Igor is a sculptor in 1921 London who operates a not-so-profitable wax museum. One rainy night, he escorts his friend, Dr. Rasmussen, and his investor/buddy named Mr. Galatalin on a private tour of the place. He shows them life-like sculptures of Joan of Arc, Voltaire, and his most-treasured piece, Marie Antoinette.
Once upon a time, Igor was only a stone sculptor, and the wax modeling portion was merely a hobby. However, sculpting was more satisfying to him, and eventually, he switched to that medium permanently. The sculptures impress Mr. Galatalin greatly, and he asks for permission to submit Igor’s work to the Royal Academy once he returns from a trip.
After the men leave, Igor’s partner, Joe Worth, shows up to collect his £15,000 he’s invested in this wasted endeavor. The reason that the museum is doing so poorly is because people only want to see the macabre figures that a nearby wax museum caters to. Igor is too much of an artist to degrade himself to that level.
To get some of his money back, Joe tells Igor his plan to burn the museum down for the £10,000 insurance policy. Under no circumstance will Igor allow that to happen as Igor doesn’t seem entirely stable mentally. It appears he thinks of his sculptures as real, and even has conversations with them.
Joe torches the place anyway.
Igor attempts to stop him, but when the two get into a fist fight, the fire begins to rage uncontrollably around them. The wax figurines succumb to the intense heat as Joe knocks Igor out cold. He locks the door behind him as he flees; leaving Igor to die in the fire.
Twelve years pass, and it’s New Years Eve in New York City. Igor has survived the fire, but the flames have left his hands and legs severely crippled. He’s now confined to a wheelchair, and has to rely on assistants to create his new sculptures. However, he’s getting ready to open a new wax museum in the Big Apple.
Elsewhere in town Florence Dempsey is a post-flapper era reporter full of sass and spunk, but on the verge of unemployment for not bringing in any news stories with any substance. Her equally spunky editor, Jim (no last name), sends her out to investigate the suicide of a model named Joan Gale.
As she heads to the morgue, a hideously-deformed person steals Gale’s body from it. Once the investigators find that her body is missing, they suspect foul play, and Gale’s ex, the rich, playboy George Winton is a person of interest. They arrest Winton, and Florence heads to the jail to question him. She though quickly decides that Winton is innocent.
Florence has a roommate named Charlotte Duncan. Charlotte has a fiancé named Ralph Burton, and Ralph has a boss named Ivan Igor where he works as an aspiring sculptor. Charlotte and Florence head to the museum; Charlotte for a lunch date with Ralph, and Florence to snoop around.
Even though the museum isn’t open for business just yet, Florence slips in while Ralph slips out to tell Charlotte that he can’t have lunch now. Igor demands every thing be perfect for the night’s grand opening.
Florence comes across a wax statue of Joan of Arc in the museum, and it’s the spitting image of the dead, missing model, Joan Gale. This sets off alarms in Florence’s head, but Igor shows up before Florence can look too close, and he kicks her out of the museum. On her way out, Igor catches a glimpse of Charlotte talking outside to Ralph. He notes her striking resemblance to his lost prized sculpture of Marie Antoinette, and he takes an immediate interest in the woman.
Also at the museum, Igor employs a couple of oddities. One is a drug addict named “Professor” Darcy, and the other is a deaf-mute named Hugo. Darcy also works on the side for Joe Worth, who we find is now now a bootlegger in town. Joe’s last known customer is conveniently suspect number one in Gale’s death, George Winton.
At one point, Florence has Winton, who’s out on bail thanks to his rich daddy, drive her around as she tails Darcy. As they drive, Winton professes his love for her and asks her to marry him. However by now, Darcy has lead them to an abandoned-looking building, and she has Winton wait outside for her. The place is where Worth keeps his illegal alcohol. Florence breaks in, and snoops around. In the basement, she discovers the same monster lurking there that was spotted at the morgue pushing what looks to be a wood coffin. Florence believes that’s where Joan Gale’s body is located.
She runs out of the building, and back to Winton’s car where she finds the cops questioning Winton. They have been following him since he was let out of jail, and want to know what he’s up to. Florence interrupts, and tells them what she just saw. They all run back to the house where they spot Darcy running from it. A couple officers run off to arrest him while everyone else heads into the building to look around. However, when they go to the basement, they only find that coffin full of alcohol, and no sign of Gale.
Once back at the station, the cops find the watch of a missing judge among Darcy’s possessions. Intrigued, they begin questioning him until he eventually breaks. He tells the police that Igor is the killer they are looking for, and he’s s been murdering people, including that missing judge and Joan Gale. He takes the bodies, and then dips them in wax to create his lifelike sculptures.
Meanwhile, Charlotte is at the museum to visit Ralph to apologize for an argument that was her fault. There’s no sign of Ralph, but Igor uses this moment to trap her there. When Charlotte tries to get free from him, he reveals that he can in fact still walk. She hits him in the face; breaking a wax mask that he made in his likeness to hide his grotesque burn from that London fire years earlier. The hideous man is the same one from the morgue and the building’s basement.
Not only has that fire disfigured Igor’s body physically, but disfigured him mentally too. He gleefully shows Charlotte Joe Worth’s dead body; finally getting his revenge on the man who made everything possible. When she faints, Igor picks her up, and straps her down on a table. He then begins heating up a vat full of wax which he intends on encasing her in so she can become his prized Marie Antoinette sculpture.
Ralph hears Charlotte’s screams, and goes to help. Igor knocks him out with a wooden truncheon. Florence is now at the museum too with Winton, and they spot Igor and Charlotte, but Winton is afraid to do anything. By now though, the police show up fresh from Darcy’s confession.
As the cops break through the basement door, Igor, driven by madness, runs up the stairs to fight them all. They have no choice but to shoot him, and he falls over a rail and to his death in the vat of molten wax. Ralph wakes in time to remove Charlotte from the table before the wax pours all over her.
Florence returns back to the newsroom to type up her story. When she reports to her editor, Jim doesn’t seem too impressed with her. However, he surprises everyone, and proposes marriage to her. She looks out the window where Winton is below waiting for her. With the choice between money and happiness, Florence chooses happiness, and says yes to Jim; leaving Winton and his millions for a happily ever after.