Plot

A humorous take on Sir Arthur Conan Doyle's classic mysteries featuring Sherlock Holmes and Doctor Watson.

In 1881 England, Sherlock Holmes (Will Ferrell) meets and befriends John Watson (John C. Reilly). Watson was about to commit suicide. Watson had returned from the Afghan war with a broken leg and a broken spirit.

Watson was going to jump on Holmes prized vegetable patch and Holmes was encouraging Watson to jump someplace else. Watson mistook that for Holmes love for him. Watson believed that Holmes cared about him and was inviting him for a drink. Regardless, Watson slips and falls off the roof and lands on top of Holmes' prized vegetation, absolutely destroying it.

Years later in London, Holmes is viewed as a legendary detective. Moriarty is the only criminal who has managed to evade Holmes and has bested him at every encounter. But then news emerges that Moriarty has been captured.

Both he and Watson are to view the trial of Professor James Moriarty (Ralph Fiennes) but are temporarily waylaid by a package sent by Moriarty and brought to them by their housekeeper, Mrs. Hudson (Kelly Macdonald). All the witnesses against Moriarty were dead and Holmes was supposed to arrive at the courtroom by noon, else Moriarty would be released by the court, for the lack of evidence. Holmes was at his home, 16 minutes before noon when Hudson gave him the package. The package was an empty box which released a mosquito. Holmes believes that the mosquito carries a deadly African plague and will cause a pandemic if released into the city. Holmes and Watson waste precious time trying to kill the mosquito. Holmes manages to eliminate the mosquito with a cricket bat, but in the process damages the glass colony of a swarm of killer bees.

Once at the trial, Holmes declares that the man on trial is not Moriarty and is instead someone named Jacob Musgraves, who is incapable of committing the murders due to tremors in his hand caused by excessive masturbation. Holmes says that Jacob is terminally ill and was anyways going to die and was thus lured by Moriarty to take his place. Despite unsuccessful attempts by Inspector Lestrade (Rob Brydon) to convince Holmes that his deduction is incorrect, Holmes is convinced that Moriarty is currently traveling to the United States & thus not in the UK to commit crimes.

Holmes claims that he investigates all crime scenes alone, even though Watson is always with him. Holmes never gives Watson his due credit and Holmes' careless actions also set fire to Watson's only copy of the manuscript that he had written on the adventures of Holmes.

After the trial, the duo travel to Buckingham Palace to attend a surprise party organized by the Queen on the occasion of Holmes' birthday. At the party they discover a corpse inside of a birthday cake along with a message from Moriarty, stating that Queen Victoria will die in 4 days' time. Lestrade blames Holmes for letting Moriarty go, but the Queen tasks Holmes with stopping Moriarty. During the autopsy, Holmes and Watson meet Dr. Grace Hart (Rebecca Hall). Grace is from US and has done pioneering work in electric-shock therapy for all ailments. They also meet the feral Millie (Lauren Lapkus) who was raised in the company of cats and has the mental capacity and mannerisms of a 4-year-old. Millie is Grace's assistant. Watson and Holmes become enamored with Grace and Millie, respectively. Lestrade tells Holmes that there is no passenger by the name of Moriarty who traveled to the US in the recent past. Holmes argues that Moriarty is simply traveling under a different name.

By the end of the autopsy, Watson declares that the corpse's cause of death is indeterminable (and they found a tattoo of a cross on the body), while Holmes believes that the person was poisoned. Furthermore, he believes that the poison came from Gustav Klinger (Steve Coogan). The poison was in tattoo ink on the dead body, and the tattoo was weak, making Holmes deduce that it was a one-armed Tattoo artist, of which there is only one in whole of London. The pair eventually locate Klinger, who is indeed in league with Moriarty as Moriarty reveals himself and says that Holmes walked right into his trap. Holmes and Watson defeat a fighter deployed by Klinger to kill them. But, Before Klinger can reveal anything, he is murdered. Holmes and Watson capture Moriarty, but Holmes is proven correct when "Moriarty" turns out to be Jacob Musgraves, who admits to have been paid and instructed to carry out specific tasks that seem to have been done by Moriarty.

Watson proposes that he be allowed to work alongside Holmes on the case as a co-detective. However, Holmes proves that he would soundly defeat Watson in a game of chess, rock paper scissors and even battleship, as he knows the moves Watson would play even before he makes them.

Holmes decides that he must seek help from his brother Mycroft (Hugh Laurie), who tells him that the murderer is someone close to him. Holmes mistakenly believes Watson to be the murderer and has him arrested. He comes to regret this decision, causing his emotions to return. Holmes goes to Watson's cell, only to find it empty save for a plate filled with red velvet cake crumbs. Deducing that his housekeeper made the cake, and that Watson left the crumbs to send him a message, he tracks Watson and Mrs. Hudson, who is revealed to be Moriarty's daughter, to the Titanic, where the murder of the Queen is to take place. After apologizing to and freeing Watson, they rush to the main room where they discover a bomb, which Watson throws out a window. The bomb lands in Mrs. Hudson's boat, killing her.

The pair are congratulated by the Queen, only for Holmes to defer the credit to Watson. The pair reconnect with Grace and Millie, the latter of whom reveals that her feral personality was an act to manipulate men. Each pair shares a kiss before Grace and Millie head out on the Titanic. After returning home, Holmes proudly displays a plaque on their building showing that Watson is a co-detective, finally giving him the recognition he desires. Later, Holmes and Watson confront Moriarty in a bar in the United States.