In 1935, American archaeologist Indiana Jones narrowly escapes an assassination attempt orchestrated by Shanghai crime lord Lao Che, who had previously hired him to retrieve the remains of Nurhaci. Alongside his young orphaned assistant, Short Round, and nightclub singer Willie Scott, Indiana flees the city, unaware that the plane they board belongs to Lao Che. Mid-flight, the pilots abandon the aircraft after dumping the fuel, leaving the group in peril. Moments before the plane crashes, Indiana, Willie, and Short Round manage to escape using an inflatable raft. Sliding down the slopes of the Himalayas on the raft, they eventually land in a river and drift into the Indian village of Mayapore.

There, the villagers beseech Indiana for help in recovering a sacred Shiva lingam stone and rescuing their kidnapped children, both of which have been taken by malevolent forces residing in the nearby Pankot Palace. Indiana agrees to assist, suspecting that the stolen artifact might be one of the five Sankara Stones, said to be divine gifts bestowed upon humanity to ward off evil. During their journey to the palace, the trio receives a warm welcome and is invited to stay as honored guests. That evening, they participate in an extravagant banquet hosted by the young Maharaja.