Four fugitives from a Chinese revolution discover a lost world of peace and harmony.

Robert Conway, a diplomat and author who is likely to become England's next Foreign Secretary, rescues ninety British citizens from a Chinese revolution. He, his brother George Conway, paleontologist Alexander P. Lovett, fugitive industrialist Henry Barnard, and tuberculosis-stricken Gloria Stone barely escape on the last Shanghai-bound airplane, but their plane is hijacked, and after a long journey, they crash in the mountains of Tibet. With their pilot dead, the group despairs of rescue, but soon, Chang, a lama of Shangri-La, arrives with porters and takes them to Shangri-La, a mysterious valley paradise. That night, Chang tells them that Shangi-La has no communication with the outside world except for the porters, who appear infrequently. The others are nervous, but Robert immediately feels at home, and enjoys a conversation with Chang, who tells him that Shangri-La was founded over two hundred years ago by the wise Belgian Father Perrault. At dinner that night, George rages about their kidnapping, then runs off with a gun to find Chang. Robert stops him, but when Chang appears, they threaten to hold him prisoner until he reveals the truth, and so Chang takes Robert to see the High Lama. Robert is both horrified and fascinated when he realizes that the High Lama is Father Perrault, now over two-hundred-years old, but quickly becomes inspired by Perrault's description of Shangri-La's mission of spreading brotherly love and saving the world's treasures from destruction. The next day, Robert goes to the Valley of the Blue Moon and finds Sondra, a beautiful resident of Shangri-La, who confirms Perrault's suggestion that it was her idea to kidnap Robert, as his books are rich with the same idealistic principles upon which Shangri-La is based. As the weeks pass, all of the group happily fit into the community, except for George, who has begun a friendship with lovely, young Maria. Robert learns from Chang that Maria is actually over sixty-years-old and that she will lose her youthful vigor if she ever leaves Shangri-La. As Robert and Chang discuss Maria, George bursts in, telling Chang he knows that the porters have been bribed not to help the kidnapped travelers, but that he is going to leave anyway, by whatever means necessary. Robert, torn between staying in Shangri-La or helping his brother, goes to Perrault for advice, but instead is given command of Shangri-La by the old priest just before he dies. George, meanwhile, tries to convince Gloria, Barnard and Lovett to leave, but they are content and wish to stay. George approaches Robert again, telling him that the porters are ready and they can leave immediately. Robert explains the philosophy behind Shangri-La, but George counters by summoning Maria, who confirms George's insistent belief that she was kidnapped by the insane lamas and has been forcibly kept in Shangri-La. Her story disturbs Robert, and so he leaves with them. As their arduous journey progresses, the porters leave Robert, George and Maria further and further behind, and even use them for target practice. The porters' cruelty backfires, however, when their gunfire starts an avalanche that buries them. The trio pushes on until, far outside Shangri-La, Maria reverts to her true age and dies. George, on the verge of madness after Maria's grotesque transformation, plunges off a cliff to his death, but Robert continues, eventually reaching a village. Through a series of cables to the prime minister in London, it becomes apparent that Robert, while being escorted to England by Lord Gainsford, had amnesia, but after regaining his memory, he escaped to return to Shangri-La. After ten months of searching for Robert, Gainsford gives up the chase and returns to London. He tells his fellow club members about Robert's amazing adventures as he attempted to find his lost horizon. As the men toast Robert's success, he climbs the mountains once more, in sight of the pass to Shangri-La, where he will rejoin Sondra and realize his dream of peace.