Violinist Erique Claudin is dismissed from the Paris Opera House after revealing that he is losing the use of the fingers of his left hand. Unbeknownst to the conductor, who assumes Claudin can support himself, the musician has used all his money to help anonymously fund voice lessons for Christine Dubois, a young soprano to whom he is devoted. Meanwhile, Christine is pressured by Inspector Raoul Dubert to quit the Opera and marry him. But famed opera baritone Anatole Garron hopes to win Christine's heart. Christine considers them both good friends but doesn't openly express if she loves them.

In a desperate attempt to earn money, Claudin submits a piano concerto he has written for publication. After weeks of not hearing a response about his concerto, he becomes worried and returns to the publisher, Maurice Pleyel, to ask about it. Pleyel rudely tells him to leave. Claudin hears his concerto being played in the office and is convinced that Pleyel is trying to steal it; unbeknownst to him, a visiting Franz Liszt had been playing and endorsing the concerto. Enraged, Claudin strangles Pleyel. Georgette, the publisher's assistant, throws etching acid in Claudin’s face, horribly scarring him. Now wanted for murder, Claudin flees into the sewers of the Opera and covers his disfigurement with a prop mask stolen from the Opera house becoming the Phantom.

After some time, the opera's owners receive a note demanding that Christine replace Biancarolli. To catch the Phantom, Raoul comes up with a plan: not let Christine sing during a performance of the (fictional) Russian opera Le prince masqué du Caucase (“The Masked Prince of the Caucasus”) to lure the Phantom out into the open. Garron plans to have Liszt play Claudin’s concerto after the performance, but the Phantom strangles one of Raoul's men and heads to the auditorium's domed ceiling. He then brings down the large chandelier on the audience, causing chaos. As the audience and the crew flee, The Phantom takes Christine down underground. He tells Christine that he loves her and will now sing all she wants, but only for him.

Raoul, Anatole, and the police begin pursuing them underground. Just as the Phantom and Christine arrive in his lair, they hear Liszt and the orchestra playing Claudin's concerto. The Phantom plays along with it on his piano. Christine watches, realizing the concerto was written around the melody of a lullaby she has known since childhood. Raoul and Anatole hear the Phantom playing and follow the sound. Overjoyed, the Phantom urges Christine to sing, which she does. While the Phantom, is distracted by the music, Christine sneaks up and pulls off his mask, revealing his disfigured face. At that same moment, Raoul and Anatole break-in. Claudin grabs a sword to fight them with. Raoul fires his gun at Claudin, but Anatole knocks Raoul's arm, and the shot hits the ceiling, causing a cave-in. Anatole and Raoul escape with Christine, while Claudin is seemingly crushed to death by the falling rocks.

Later, Anatole and Raoul demand that Christine choose one of them. She surprises them by choosing to marry neither one of them, instead choosing to pursue her singing career, inspired by Claudin’s devotion to her future. The film ends with Anatole and Raoul going to dinner together.