In Thebes, Egypt, 1290 BC, high priest Imhotep engages in an affair with Anck-su-Namun, the mistress of Pharaoh Seti I. When the Pharaoh discovers their tryst, Imhotep and Anck-su-Namun kill him. As Seti's guards arrive, Imhotep flees while Anck-su-Namun kills herself, intending for Imhotep to resurrect her. After Anck-su-Namun's burial, Imhotep and his priests steal her corpse and travel to Hamunaptra, the city of the dead, where they begin the resurrection ceremony. However, the group is intercepted by Seti's bodyguards, the Medjai, before the ritual could be completed, and Anck-su-Namun's soul is sent back to the Underworld. Imhotep's priests are all mummified alive. Imhotep himself is sentenced to immortal agony, condemned to suffer the Hom Dai curse: having his tongue removed and then being buried alive with flesh eating scarab beetles. Imhotep is buried under high security, sealed away in a sarcophagus at the feet of a statue of the Egyptian god Anubis, and kept under strict surveillance by the Medjai, since if Imhotep were ever to resurrect, the entire world would be doomed.
In 1923, well over 3000 years after Imhotep was buried, a unit of the French Foreign Legion battle with Tuareg nomads at Hamunaptra. The unit is swiftly overwhelmed, leaving only two survivors: cowardly Hungarian thief Beni Gabor flees, while his American friend and soldier Rick O'Connell is cornered. The nomads suddenly flee in terror when they hear sinister whispers, and Rick quickly follows them when the ground appears to come to life. Watching from afar, the Medjai, watching over the Tuaregs and the Legion, decide to let the desert kill O'Connell.
Three years later, Jonathan Carnahan presents his sister Evelyn, a Cairo librarian and aspiring Egyptologist, an intricate box and map which Jonathan says he found in Thebes. After the pair discover the map leads to Hamunaptra, Jonathan reveals he stole it from an American adventurer, soon revealed to be Rick O'Connell, who survived the desert only to end up in prison. Evelyn and Jonathan visit Rick; he tells them that he knows the location of the city, and makes a deal with Evelyn to lead them there, once Evelyn saves him from being hanged by bribing the prison warden with a share in the promised treasure.
Rick led Evelyn, Jonathan, and the warden to the city, where the group encounters a band of American treasure hunters led by the famed British Egyptologist Dr. Allen Chamberlain and guided by Beni, who O'Connell is less than pleased to discover on the boat. Shortly after reaching Hamunaptra, the warden is killed by a scarab. The expeditions are then attacked by the Medjai, led by the warrior Ardeth Bay. Ardeth warns them of the evil buried in the city, but despite his warning, the two expeditions continue to excavate in separate portions of the city. Evelyn searches for the Book of Amun-Ra, a solid gold book reportedly capable of taking life away, but comes across the remains of Imhotep instead. The team of Americans, meanwhile, discover a chest with ancient engravings that Chamberlain deciphers as saying that any and all who open the box are cursed if Imhotep is awakened. While Beni refuses to assist them and flees, the Americans open the chest to find the black Book of the Dead, accompanied by canopic jars carrying Anck-su-Namun's preserved organs. Chamberlain steals the Book of the Dead while each of the Americans pockets a jar as loot.
At night, Evelyn takes the Book of the Dead and reads a page aloud, accidentally awakening Imhotep. A cloud of locusts descends on the city, devouring the local diggers and trapping the two expeditioners inside the pyramid. One of the Americans, Burns, is left behind in the confusion and is attacked by Imhotep, losing his eyes and tongue. The Medjai rescue Burns, and escort the expeditioners back to Cairo, but Imhotep follows them with the help of Beni, who bargains with Imhotep; the creature promises not to kill Beni in return. Imhotep absorbs the life from Chamberlain and the Americans, returning to full strength, and bringing the 10 plagues back to Egypt. Seeking a way to stop Imhotep, Rick, Evelyn and Jonathan meet Ardeth at a museum. After Evelyn reveals that Imhotep referred to her as Anck-su-Namun in Hamunaptra, Ardeth and museum curator Terrence Bay hypothesize that Imhotep wants to resurrect his lover again and will do so by sacrificing Evelyn. Evelyn muses that if the Book of the Dead brought Imhotep back to life, the Book of Amun-Ra can kill him again. As they deduce the location of the Book, Imhotep corners the group with an army of slaves. Evelyn agrees to accompany Imhotep if he spares the lives of the rest of the group. Imhotep goes back on his word and leaves his slaves to kill the group anyway. However, Rick discovers an entrance to the sewers and they escape. Terrence sacrifices himself just to buy the others time to escape.
Imhotep, Evelyn and Beni return to Hamunaptra, pursued by Rick, Jonathan, and Ardeth. Imhotep awakens Anck-su-Namun, and prepares to sacrifice Evelyn, but she is rescued after an intense battle with Imhotep's mummified priests. Jonathan reads from the Book of Amun-Ra, awakening a group of mummified warriors, who kill Anck-su-Namun. When Evelyn reads from the Book, Imhotep becomes mortal again and Rick stabs him, forcing him into the River of Death. Rapidly decaying, Imhotep leaves the world of the living, vowing revenge with the same words he carved into his sarcophagus, Death is only the beginning. While looting treasure from the pyramid, Beni accidentally sets off an ancient booby trap and is trapped by a swarm of flesh-eating scarabs as Hamunaptra collapses into the sand. The heroes escape, although they lose the Book of Amun-Ra in the process. Ardeth rides away as Rick and Evelyn kiss and, with Jonathan, ride off into the sunset on a pair of camels laden with Beni's treasure.
- The Powerpuff Girls, Lazlo, Raj, Clam, and the Angry Beavers guest star in this film
- The storyline continues in Ed, Edd, Eddy and The Mummy Returns.