It is a toss-up as to who is most displeased when Patrolman Moe Finkelstein (Milton Berle) is given the duty of guarding the German consulate ran by Karl Baumer (Otto Preminger); neither Moe nor Baumer are too happy with this turn of events. Moe, however, quickly becomes fiends with the other residents of the consulate: Sophie Baumer (Joan Bennett), the consul's wife; the secretary Baron Max Von Alvenstor (Carl Esmond); and a pretty maid named Freida (Poldi Dur as Poldy Dur.)Moe senses an underlying tension that is not entirely accounted for by the gathering clouds of war. The gambling-loving Baumer has lost a large sum of money belonging to the German government, Sophie has learned to hate her husband and what he stands for and represents, and Baron Max has fallen in love with her. Max confronts Baumer with the discrepancy in the consulate's funds, and Baumer threatens to inform Berlin that one of Max's grandparents was not "Aryan." The arrival of a group of Nazi saboteurs (Ted North, Elmer Jack Semple and J. Norton Dunn) and the insistence they be given the funds to finance their project stirs consulate affairs even further.

Despite his best efforts to avoid the assignment, police officer Moe Finkelstein is ordered by the mayor of New York City to guard the life of German Consul Karl Baumer. Moe turns in his badge when he realizes that he has been assigned to protect a Nazi, but the mayor refuses to accept his resignation. The mayor tells Moe that although he is opposed to Adolf Hitler's Nazi regime, he is under special orders from Berlin to halt demonstrations in New York against Nazi sympathizers and organizers. The mayor tells Moe that he has decided to abide by the wishes of the Berlin government in order to teach the Nazis the difference between the American system of democracy and their fascism. Soon after he arrives at the Consul's residence, Moe discovers that Baumer is in trouble with Berlin for having squandered money meant for sabotage. Meanwhile, Baumer's secretary, Baron Max von Alvenstor, has become disenchanted with Baumer and the Nazi cause and refuses to abide by Baumer's orders to stall the delivery to Berlin of a damaging financial report. Sophie, Baumer's Czechoslovakian-born wife, confesses to Moe that she despises her husband and that she married him only to get her father out of prison. Moe comes to truly hate Baumer, and unable to contain his anger one day, flies into a rage and insults the Consul. Moe's temper eventually subsides as he begins a romance with Frieda, the Consul's maid, whom he takes on a date to see the film Confessions of a Nazi Spy . Also at odds with Baumer is Otto Horst, the bumbling leader of the American bund, who is ordered by the Consul to procure false indentification cards for a group of German saboteurs being sent to blow up an American port. In order to protect himself from Berlin's harsh reprimands, Baumer tells Max that he has information that his ancestors are Jewish and that he will use it against him unless he stalls the financial report. Under orders from Berlin to dispense with Horst's services, Baumer arranges an elaborate scheme to frame Max for Horst's murder. Baumer then tries to enlist the help of his wife in the scheme, but she refuses and warns Horst of the plan. Horst decides to defend himself against the attack by carrying his gun to his next visit with the Consul. Meanwhile, the saboteurs have rigged a bomb to explode at an American port at the moment Hitler concludes his radio broadcast. While listening to the broadcast with Horst, Max and Dr. Jennings, Sophie, transfixed by the sight of Horst's gun, grabs it and shoots her husband. A loud noise in the radio broadcast coincides with the gunshot, and it takes a moment before Max notices that Baumer is dead. Max quickly whisks Sophie out of the room before anyone sees her and tells her to flee. When Moe discovers the body, he rounds up all the possible suspects, including Sophie, who readily confesses to killing her husband. To protect her, though, Max insists that he was the one who killed the Consul. All are dumbstruck when Moe reveals that Baumer was not only shot but stabbed as well. Furthermore, following Dr. Jennings' examination of the body, it is determined that Baumer was poisoned, too. Max, meanwhile, rushes to the ship where the saboteurs are hiding and orders them to dismantle the bomb before it detonates. With only minutes to spare, the bomb is dismantled and the saboteurs are captured. Back at the Consul's house, Max identifies Horst as an accomplice to the saboteurs, and Horst is arrested. Max is cleared of murder charges when the coroner's report reveals that Baumer died of poisoning by his own hand. The poison apparently was intended for Max, but the glasses got switched and Baumer accidentally took his own poison.