Handsome Prince Ahmad (John Justin), the rightful King of Bagdad, has been blinded and cast out as a beggar. Now a captive of the wicked Grand Vizier Jaffar (Conrad Veidt) he is cast into a dungeon where he meets Abu (Sabu), the best thief in all Bagdad. Together they escape and embark on a series of escapades that involve a wish-granting genie in a bottle, a mechanical flying horse, an all-seeing magic jewel, a flying carpet and a beautiful princess with fabulous costumes.