In 2021, American writer Joan Watson arrives in London to move into 221 Baker Street, Apartment 2B. Mrs. Hudson, the landlady, tells her she will be sharing the apartment with another woman named Sherlock Holmes, who is an eccentric deductive consultant. Holmes is able to accurately determine many facts about Watson, including that she is a divorced doctor, which Watson denies. In a kerfuffle, Watson accidentally smacks Holmes in the face, causing Holmes to bleed. The sight of the blood makes Watson weak. Having no other living options, Watson reluctantly decides to stay.

Inspector Lestrade of Scotland Yard arrives to ask for Holmes’ help on a case. Holmes brings Watson along, despite protests from both, and they arrive at a dirty hotel room. The body of a man is in the bathtub. Lestrade thought it was a suicide, but is befuddled because the letters “RACHE” (which is the German word for revenge) are written in blood on the wall next to the body. Holmes finds a strand of red hair and figures a red-haired woman was in the room around the time of the murder. She quickly leaves and reenters the room, announcing that the man did not commit suicide and that his name was Joseph Timothy Drebber. She deduced from his belongings that he was a taxi driver. Watson suggests that the “RACHE” might actually be “RACHEL,” an unfinished message left by the deceased. After speaking on the phone, Lestrade tells them that they found the red-haired woman. 

At a different hotel, Holmes, Watson, and Lestrade arrive at a room where the walls are covered with blood, which is all that remains of the red-haired woman. Lestrade tells them she was a sex worker. Holmes plants a story in the newspaper that Mr. Drebber’s wedding ring was stolen from the scene of the first crime. When someone calls looking for the ring, they will say it was found and go to their address for more information.

The three return to the flat and a distraught Lucy Drebber, the widow of Mr. Drebber, arrives, responding to the newspaper story. From examining Mrs. Drebber’s own dull wedding ring compared to Mr. Drebber’s clean ring, Holmes reveals that Mrs. Drebber is the murderer, misleading her into a confession. Mrs. Drebber discovered her husband was being unfaithful. Putting on a red wig, Mrs. Drebber impersonated the red-haired escort, who she also killed, to kill her husband. Then she staged the suicide and wrote “RACHE” on the wall to misdirect the investigators. Mrs. Drebber is then arrested.

The next day, Elliot Monk, a Texan CEO and tech billionaire, arrives at the flat with a case. He is very sleazy, having created social media apps to sell private data to the highest bidder. Monk tells them of Irene Adler, an escort he frequently hooked up with. They made a sex tape and he claims she is threatening to release it to the public. Every detective Monk has hired has failed to get their hands on the tape. After Watson kicks Monk out, Irene suddenly appears in the room, to both Watson and Holmes’ surprise.

Holmes finds herself awestruck by Irene. Irene tells them that Monk is launching a campaign to buy himself a powerful seat in the U.S. Senate, rebranding himself as a “Champion of Family Values.” Irene says she didn’t blackmail Monk, but merely told him if he chooses to announce his candidacy, she will choose to release the footage, revealing his hypocrisy. Before she leaves, she warns Holmes to watch out. Holmes decides to take on Monk’s case anyway. 

Disguised as nuns, Holmes and Watson go to Irene’s apartment and steal a USB, supposedly containing the sex footage. They reconvene with Lestrade and watch Monk’s announcement of his candidacy for Senator of Texas on TV, but suddenly Monk and Irene’s sex tape is released online and goes viral, ruining Monk. Holmes and Watson receive a message from Irene, saying she knew they were the nuns. They find that the USB contains music from the opera Tosca, which is significant to Holmes and Irene. 

Reinvigorated, Holmes and Watson go on to take several more fascinating cases. Holmes realizes that the criminals they have encountered could not have developed their own sophisticated plans, so someone else must be the mastermind behind them all. She reveals that she feels like she is being tested or taunted by this mastermind.

After some prying, Watson finally shares her backstory with Holmes. Watson was a top student and graduated from an Ivy League medical school. She did her residency at one of the best hospitals in New York working in the ER, where she met a surgeon, and they eventually got married. She was living the dream until 2020 when pandemic restrictions were enacted on her hospital. Unlike other doctors, she was very compassionate with patients, and one day, she started to get panic attacks whenever she saw someone injured. They got so bad that she lost her job and her husband. 

Irene arrives at the flat, apparently injured. She tells them of Moriarty, a man who made his fortune operating the biggest remote marketplace on the dark web, providing creative solutions for criminals. He offered Irene a gig with a high commission. When she declined, he sent men to attack her and threaten her into compliance. Holmes tells Watson she will do the case alone, while Watson looks after Irene. However, after Holmes is gone, Irene steals Holmes’ journal, which logs criminal activity in London, and then knocks out Watson. 

Watson awakens in an abandoned train station above an active railroad, where Holmes has arrived to rescue her. Irene has them both at gunpoint. Then Lestrade appears on the scene. Holmes reveals that Lestrade is actually Moriarty, who killed the real Lestrade and stole his identity. Moriarty talks about his line of work, obtaining and selling sensitive information. He tells Sherlock he wanted to test her and now wants her to work with him. Upon hearing this irresistible offer, Holmes freezes. Irene refuses to put the gun down, telling Moriarty that they agreed she would be left alone after she gives Holmes to him, but Moriarty goes back on that promise. Moriarty then grabs Watson at gunpoint. 

Holmes snaps out of it and tells Moriarty she doesn’t care about Watson. Holmes grabs Irene’s gun and shoots Irene, which causes Watson to have a panic attack and keel over. Holmes reasserts her superiority in her work, which increasingly irritates Moriarty, and gives Watson the opportunity to get up and tackle him. After a struggle, they overpower and knock Moriarty out. After handcuffing him, Holmes reveals she shot blanks at Irene, who is unharmed.

Watson is bewildered about being kept in the dark about Holmes’ plan. Holmes reveals that she knew something was off with Lestrade from the beginning. Holmes had teamed up with Irene, who agreed to collaborate because Moriarty contributed to the death of her mentor, the red-haired woman. Vengeful, Irene retrieves the gun, whispers the name of her mentor in Moriarty’s ear, which shocks him, and then shoots him. As she begins her departure, she realizes Holmes’ journal is filled with nonsense instead of criminal secrets. Irene kisses Holmes and pushes her into Watson, allowing her to flee by jumping on top of a passing train. 

Watson plans to move out of their shared flat, but Holmes convinces her to stay, reaffirming their relationship as friends. Holmes suddenly recognizes who is about to enter their apartment. Irene and Moriarty appear at the door, saying they have a case for them.