Sir Charles Lytton, who is really the famous jewel thief, the Phantom, wants the Pink Panther, a priceless jewel owned by beautiful Princess Dala. Inspector Jacques Clouseau wants the Phantom, whom he has been chasing unsuccessfully for 15 years. Clouseau also wants the Phantom's female accomplice, unaware that she is really his own wife, Simone, the Phantom's mistress. Princess Dala visits the ski resort of Cortina; and there Sir Charles, Clouseau, and Simone also appear. George, Sir Charles's nephew, who supposedly has been attending school in America at his uncle's expense but is actually an amateur in the same "profession" as his uncle, also arrives unexpectedly at Cortina. After many complications, Clouseau learns that Sir Charles is the Phantom, but he cannot capture him. Later, when Princess Dala plans a costume party at her villa in Rome, Clouseau warns her that the Phantom will undoubtedly attempt to steal the Panther from the library safe during the party. Sir Charles and George come to the party, both dressed as gorillas, and begin to work on the safe from opposite ends. They crack it simultaneously only to find it empty except for a white glove, the Phantom's trademark. The lights go out and when they come on again it is announced that the Panther is missing. After a wild car chase, Clouseau apprehends Sir Charles and George. Simone goes to Princess Dala to ask help to free them. At their trial, Clouseau testifies that he was present at each of the Phantom's thefts. Suspicion is thrown on Clouseau as the actual Phantom, and Clouseau is arrested when he pulls a handkerchief from his pocket with the Panther attached to it--the work of Simone and Dala. Sir Charles and George are freed and whisked off by Simone to South America. Clouseau, enveloped in the admiration of the crowd attending the trial and basking in the first adulation of his life, protests his innocence less vigorously as he is taken to prison. Sir Charles promises Simone that, as soon as they are safely in South America, he will send a letter to the Italian government clearing the innocent Clouseau.