When Emil travels by bus to Berlin to visit his grandmother and his cousin, his money is stolen by a crook who specializes in digging tunnels. Emil must get the money back as it is for his grandmother. While following the thief, Emil runs into Gustav, an enterprising young boy who gathers up all his friends to help Emil find the money. Emil's cousin also gets involved and they get into more trouble than they bargained for when Emil's pickpocket turns out to be mixed up with a couple of notorious bank robbers.

En route from Neustadt to Berlin by bus, Grundeis, a petty crook, steals the 400 marks that 10-year-old Emil Tischbein had been entrusted to deliver to his grandmother. Emil suspects Grundeis of the theft and follows him to a Berlin cafe. Emil then summons a policeman, but the shifty Grundeis, known in the underworld as The Mole, escapes to a rendezvous with The Baron, a notorious figure. Emil meanwhile enlists a band of child "detectives" led by Gustav, a street urchin, and together the boys track down Grundeis and overhear him plotting with The Baron and Müller, another accomplice, to rob a large Berlin bank by tunneling into the vault from the cellar of an adjacent bombed-out building. The boys then trail the crooks to the ruins, but Emil falls through a hole in the upper level and is captured by The Baron, who forces him to aid in blowing apart the bank vault. The Baron and Müller doublecross Grundeis and leave him sealed in the tunnel with Emil, to be obliterated by a stick of dynamite with a burning fuse just outside their grasp. Gustav arrives with reinforcements, detaches the fuse, and alerts scores of neighborhood children. The children surround The Baron and Müller, detain them until the police arrive, and receive a handsome reward.