Princess Dala (Claudia Cardinale) leaves her home country taking with her a famous diamond known of as "The Pink Panther". A jewel thief known as the Phantom is after the famous jewel. The Phantom is actually wealthy Brit Sir Charles Litton (David Niven). His playboy nephew, George (Robert Wagner) is also after the diamond hoping to pin the heist on the Phantom. George is having an affair with Madame Clousseau, the wife of a bumbling detective who is trying to find and arrest the Phantom. All the main characters attend a fancy party where several attempts are made to steal the jewel and where Clousseau bumbles around trying to stop the theft. In spite of his ineptness as a detective, Clousseau ends up having Sir Charles and friends arrested. His wife sabotages him, however. She convinces the judge to ask questions which implicate her husband in the theft. Princess Dala, who has feelings for Sir Charles, attaches the diamond to Clousseau's hankerchief. When he pulls his handkerchief out during the trial, everyone is shocked where the elusive gem has been found.