Landlady Mrs. Warren approaches Holmes because she is concerned about her new lodger, who never leaves his rooms. Ten days earlier, the young, black-bearded man, who had spoken in good but accented English, had paid over and above the usual rate for two weeks’ board, but with the strict condition that he be given a key to the house and on no account be disturbed. Since then, Mrs. Warren explains to Holmes, he has emerged only once, on the first night, when he left the house and returned without being seen.

As per his instructions, the lodger’s meals are left on a tray outside his door, and if he requires anything else, he prints the word for it, in block capitals, on a piece of paper and leaves it for her.

Holmes believes that the fact the lodger writes notes is an attempt to disguise a lack of proficiency in English, and as other clues come to light he deduces that the person now occupying the rooms is not the bearded man who had rented them, and that one lodger has been substituted for another.

The lodger regularly requests a copy of the Daily Gazette newspaper, and Holmes suspects that the bearded man may be sending messages to the lodger via the paper’s personals column. Scanning through his collection of clippings, Holmes immediately comes across an advertisement posted just two days after the room was let: “Be patient. Will find some sure means of communication. Meanwhile, this column. G.” Later postings seem to confirm that Holmes is on the right track and alert him to both a code and a nearby building—“a high red house with white stone facings”—from which “G” will signal messages.

At that very moment, a flustered Mrs. Warren arrives at Baker Street with a peculiar story: that morning her husband was abducted by unknown assailants as he left the house. After being driven around in a cab for an hour he was dumped, unharmed, on Hampstead Heath; Holmes guesses that the kidnappers had mistaken him for the lodger in the foggy morning light, and so he asks to see the lodger.

The boarding house run by Mrs. Warren is on Great Orme Street, a fictional version of Great Ormond Street, which has many buildings in the Queen Anne style (pictured).

Holmes and Watson visit the house and, through the artful placing of a mirror opposite the door of the lodger’s rooms, they manage to catch a glimpse of the substituted lodger; to their surprise, rather than seeing a man they observe a beautiful, dark-skinned young woman who seems very frightened.

That evening, Holmes and Watson position themselves at a window in the lodging house. They witness a candle flashing in the nearby house, which must be “G” sending coded messages to the lodger’s room. The code makes no sense until Holmes realizes it is in Italian: attenta (beware) and pericolo (danger). The final message is interrupted very suddenly. Alarmed, Holmes and Watson hurry down to the building in which “G” is located, and are amazed to find standing in its doorway Inspector Gregson of Scotland Yard, and Leverton—a detective with the Pinkerton Agency (a private detective firm established in the US in 1850, which also features in The Valley of Fear). They are on the trail of Italian mobster Giuseppe Gorgiano—a notorious killer responsible for about 50 deaths.

The men have traced Gorgiano to this building and have been lying in wait for him. Since they began their watch, three men have come out of the house, including one whose description fits that of Mrs. Warren’s bearded lodger. However there is no sign of the killer himself. Holmes tells the police about the warning signals that were sent from an upstairs window, and they assume that Gorgiano must have been attempting to alert his accomplices in London of the dangers.

Deciding to make an arrest, the policemen enter the house and Holmes and Watson follow. They locate the room from which the messages had been sent and find Gorgiano’s dead body sprawled on the floor. The blade of a knife has been plunged into his throat, and at his side lie a dagger and a single black leather glove. Clearly there has been a fight, and the huge Italian has been felled. As the men survey the grisly scene, Holmes retrieves the candle and signals vieni (come) from the window.

Moments later, the mysterious female lodger arrives. When she sees Gorgiano’s body, she reacts with joy and delight as she thinks that the police have killed him. However, on realizing that, in fact, her husband—“G” (Gennaro), the bearded man—is the murderer, she insists on telling the investigators the whole truth; she is confident that, given the dead man’s heinous crimes, “there can be no judge in the world who would punish my husband for having killed him.” The rest of the story, apart from a short epilogue, is related almost entirely through the lodger, who introduces herself as Emilia Lucca.

Emilia explains that she and her husband Gennaro emigrated to New York from Italy four years ago, fleeing both her father’s disapproval of their relationship and Gennaro’s naïve youthful involvement in a Neapolitan criminal society called the Red Circle. For a while, the couple enjoyed a settled life: Gennaro was given a responsible job by a fellow Italian he had helped, and they bought a small house. But then Gennaro’s past caught up with him: he was tracked down by a member of the Red Circle called Gorgiano—the “grotesque, gigantic and terrifying” thug who had first initiated him into the organization back in Italy. Once they had taken an oath of allegiance, the Red Circle’s members were in the organization’s grip for life.

After escaping the authorities in Italy, Gorgiano had settled down in New York, where he soon established a new branch of the Red Circle that funded its activities by blackmailing wealthy Italian-Americans, threatening violence if they did not cooperate. Gennaro’s employer and benefactor (who was also his best friend) became a target of the organization, but he refused to give in to their demands, and so Gennaro was ordered, on pain of death, to dispose of him, having been given a disc with a red circle on it—“the mandate for murder.” Of course, he had no intention of murdering his friend, and after warning him of the Red Circle’s orders and notifying the Italian and American police, Gennaro and Emilia escaped to London, with Gorgiano in pursuit.

Once there, Gennaro ensured Emilia’s safety in Mrs. Warren’s house, but it appeared that Gorgiano had closed in on him, ahead of the police. Fortunately, however, it seems that it was Gennaro who managed to strike the fatal blow.

Holmes, Watson, and Inspector Hawkins (played by Jeremy Brett, Tom Chadbon, and Edward Hardwicke) investigate the mark of the Red Circle in the 1994 Granada television episode.

Conan Doyle does not reveal how Gennaro managed to dispatch his enemy—single-handedly, or aided by the two other men seen exiting the house. Neither does he say whether he is later apprehended by the police. Emilia’s fate also goes unrevealed, with the tale wrapping up, rather abruptly, with Holmes and Watson heading off to the opera. The last few pages introduce a rambling story that roams from Italy to New York to London, and some have suggested that Conan Doyle was unable to produce a satisfying ending because of the Strand’s scheduling and space constraints.

In spite of this, the story’s build- up is intriguing. Throughout much of the tale, Holmes’s own small investigation runs in parallel with the one headed by Scotland Yard and the Pinkerton detective agency—as Holmes observes, the two “different threads” lead “to the same tangle.” And so, while the story begins in a familiar vein, with Holmes piecing together small clues, it becomes a drama about organized crime and intimidation within the US that seems in many ways far beyond the world of Holmes.