A dignified musical concert is planned for the evening of November 12th, at 9 pm, at Lord (Lawrence Grossmith) and Lady Dalroy's (Heather Thatcher) House, old friends of the Alquists. Among the invited guests are Brian Cameron and the Antons. But Gregory has handwritten a note to decline the invitation on account of Paula's illness.

When Paula insists on attending the reception, even if she must go alone ("I must get out of this house, meet people and see a little of what's going on in the world. I'm going to this reception"), Gregory reluctantly agrees to accompany her - while dressing, a plan dawns in his head. Nancy spitefully expresses her own disgust about the changed plans that affect her night-off, and she briefly meets with beat-policeman Williams to instead see him on Sunday.

During the musical performance, Gregory psychologically rebukes his young bride, causing her to break down and become hysterical when he proves that she has stolen his pocket watch and hidden it in her handbag. (Brian Cameron witnesses her erratic behavior from behind them in the concert audience.) When she cannot control herself, convinced that she is mad, they leave the party immediately and return home.

In their bedroom, Gregory becomes impatient and humiliates his wife about making a spectacle of herself in public:

Gregory: I've tried so hard to keep it within these walls - in my own house. Now, because you would go out tonight, the whole of London knows it. If I could only get inside that brain of yours and understand what makes you do these crazy, twisted things.
Paula: Gregory, are you trying to tell me I'm insane?
Gregory: It's what I'm trying NOT to tell myself.
Paula: But that's what you think, isn't it? That's what you've been hinting and suggesting for months now, ever since...the day I lost your brooch. That's when it all began. No, no, no, it began before that. The first day here when I found that letter. (Gregory stops and abruptly turns.)
Gregory: What letter?
Paula: That one I found among the music from that man...
Gregory: Yes, you're right. That's when it began...I can see you still, standing there and saying, 'Look. Look at this letter.' And staring at nothing.
Paula: What?
Gregory: You had NOTHING in your hand.
Paula: What?
Gregory: I was staggered, but I didn't know then how much reason I had to be...
Paula: I don't know. What dream?
Gregory: I didn't know that about your mother.
Paula: What about my mother?
Gregory: Your mother was mad.
Paula: Gregory.
Gregory: She died in an asylum when you were a year old. [Note: That was a lie - she died during Paula's birth.]
Paula: That's not true!

Gregory reveals - with a bold-faced, twisted lie - that Paula's mother (Alice Alquist's sister), before her death a year after Paula's birth, was committed to an insane asylum, with alarming symptoms that parallel Paula's mad behavior. He literally declares her insane and threatens to institutionalize her (with "visitors" - two doctors), as she doubts her own sanity and collapses. Becoming paranoid himself, he also suspects that her sole motive to attend the musical concert - was to meet and talk to "the man who was sitting behind us" (Brian Cameron), but Paula truly doesn't know who he is talking about:

It began with her imagining things, that she heard noises, footsteps, voices, and then the voices began to speak to her. And in the end, she died in an asylum with no brain at all...Now perhaps, you will understand the other things about yourself - and me. Now perhaps, you will understand why I cannot let you meet people...YOU LIE! WHY DO YOU LIE TO ME?...(He retracts his accusation) I know you never lie to me. I believe you. You're not lying. It's worse than lying. You've forgotten. You've forgotten him as you forget everything. But perhaps I'm wrong to try to handle this myself. The case is one for people who know about those things. Paula, we shall have visitors - and shortly.

As he leaves the house on a "nasty" night, he is secretly watched by Brian Cameron, and Williams passes him on the street as he goes around the block. When he vanishes into thin air down an alley (leaving a burning cigarette behind), Cameron and Williams deduce that he may have returned to his own house - an "against common sense" theory:

Cameron: Why should a man walk out of his own house and all the way around the corner just to get back to the same place where he started from?
Williams: But the service entrance to number nine is out front. There's no way into number nine from back here.
Cameron: Well then, where did he go?
Williams: But five's empty. But what would he want to go into an empty house for?

Paula is tormented again by footsteps above her, and flickering and dimming gaslights - and she frantically screams down the stairs to Elizabeth for help. She asks if the cook turned on the gas downstairs, thinking that the lights lowered "as if someone had turned it on in some other part of the house." But Elizabeth neither hears noises from the off-limits attic above nor has adjusted the gaslights: "The whole floor is boarded up. You know that as well as I do. No one can't get in up there. You know, ma'am, you just imagine things."

In his office, Brian draws a sketch of the Thornton Square residences, with a dotted line marking the hypothetical route taken by Gregory Anton in the evenings to the rear of the buildings (the residences are marked No. 9, No. 7, and No. 5 - EMPTY HOUSE). Williams also reports to him about an occurrence at 3 am earlier that morning - the return of a suspicious-looking Anton to his home:

I managed to get a good look at him as he walked under the lamp-post. And I'll tell you, Mr. Cameron, that man had been up to something...he was kind of in a mess. Clothes untidy, tie all on one side, dirt and dust all over him, even on his face...as though he'd been digging in a cellar or something.

While having breakfast at 9 Thornton Square with Nancy, Williams also learned that the "master" may be sending the "mistress" away for quite a long time - "and that he wanted her [Nancy] to stay and look after him." Cameron reacts to the discoveries, remarking that they could mean "any one of a number of quite unpleasant things." He vows to get into the house that evening when the ever-watchful husband is gone - while Williams is engaged with Nancy elsewhere. The constable jokes about his duty to distract the maid: "Any little thing I can do for the Yard, sir."

That evening as Paula reads from a book, her mind is haunted by recollections of her husband's warnings about her mother: "Your mother was mad...She died in an asylum with no brain at all!"

When Gregory departs, Cameron arrives at 9 Thornton Square, introduces himself as "a friend," and convinces Elizabeth to let him see the distressed and "frightened" Paula who is on the verge of a nervous breakdown. He gains her confidence and trust by showing her one matching stage glove given him by her aunt when he was an admiring, twelve year old boy. Brian suspects that Paula's husband will be sending her away soon, and explains the proof he has for the theory that she isn't "going out of (her) mind." He notices the gaslights dimming - factual evidence that only indicates that "someone else has turned it on," and the sound of footsteps in the attic above her bedroom - both strangely coincident with her husband's departure and return. With these two facts, Cameron understands their true meaning - he is convinced that Gregory spends his nights methodically hunting and searching through her aunt's possessions in search of her missing jewelry:

Mrs. Anton. You know, don't you?...You know who's up there...There's an alley behind these houses. He goes in the back of number 5 - that's the empty one - and then across the roof...You said there's old furniture up there...All of her things? (To himself) And they said the case was dead.

The scene briefly shifts to the sounds of a dark shadowy figure (with disembodied hands) searching through junk in the attic, including tossing aside the Aunt's regal gown (with jewelry sewn into the bodice) that had been seen earlier in the painted portrait above the fireplace. A few moments later, the face of the figure was revealed to be Anton's.

Paula is bewildered and dismayed that Gregory may be in the attic and the night sounds are not in her mind. When Cameron searches through Gregory's locked desk, she discovers the letter from Sergis Bauer ten years earlier: "I was right. There was a letter...I found this. But my husband said I dreamed. And now it's here. It's been here the whole time." Cameron remembers in the case that Bauer was connected with Alice Alquist - "he was a young pianist who played for her in Prague" - and Anton's handwriting matches that of the letter. He concludes:

"Your husband and Sergis Bauer are one and the same person. And this letter from Sergis Bauer to Alice Alquist was written two days before her murder."

Her treacherous husband's plot against her, and his long-suffering quest for the jewels after murdering her aunt is finally revealed in the film's suspenseful conclusion - although the nerve-wracked, hapless and faltering heroine is still disbelieving that her trusted but jewel-obsessed, deceitful husband wants her out of the way so that he can continue searching for the missing jewels:

Paula: But he said there wasn't any letter. He said I was going out of my mind.
Cameron: You're not going out of your mind. You're slowly and systematically being driven out of your mind.
Paula: But why? WHY?
Cameron: Perhaps because you found this letter and know too much. (He looks up) Or because then he would have control of your property, of this house, and could search in the open instead of the dark like this.
Paula: Why search? What is there to search for?
Cameron: For the things for which Alice Alquist was murdered. Her jewels.
Paula: But I have her jewels.
Cameron: Not the jewels you didn't know she had. Famous jewels, jewels for which he was searching that night. When he was frightened away by hearing someone come down the stairs. Someone he never saw. A little girl.
Paula: Me. Me. But he - if he was here that night, but he never - he never knew her. You're wrong...You're making a mistake. I know him. He's my husband. I've lived in the same house with him.You're talking about the man I'm married to.
Cameron: Mrs. Anton. There's not a detail of the Alquist case that I don't know and unless I'm more mistaken than I've ever been in my life, the man called Sergis Bauer has a wife living in Prague now. So you see, Mrs. Anton, he must have planned the whole thing step by step from that night.
Paula: Oh, if that were true, then from the beginning there would have been nothing. Nothing real from the beginning.
Cameron: I'm sorry to take everything away from you like this, but you must believe me. Your whole life depends on what you're going to do now, nothing less than your whole life. Don't you see the way everything fits in?

Cameron notices that the lights have grown stronger - an indication that Anton is returning. So he hurriedly leaves the house from the front door and lingers outside. In the attic as Gregory is about to leave, he spies the long-lost, four glittering crown jewels sewn (amongst other cheaper imitations) into the bodice of one of Alice Alquist's gowns - the one she wore in the portrait that hung above the fireplace. He pries out the four valuable jewels, and then enters his home through the boarded-up door leading to the third-floor attic. In his bedroom, he discovers that his desk has been tampered with. Desperate, he enters Paula's bedroom and brashly accuses her of opening his desk - she responds that "a man who came to see me" was responsible - unintentionally proving her own psychic disintegration. With dark shadows under her eyes, Paula is driven closer to insanity when Elizabeth doesn't confirm her story that "a man" had entered:

I couldn't have dreamed it...Did I dream?...Are you telling me that I've dreamed all that happened?...Then it's true. My mind is going. It was a dream...Then take me away, I can't fight it anymore. It was a dream.

Following after Anton by climbing in through the attic's skylight and coming down the stairs from the third floor, unexpected ally Brian Cameron (with the gown in his hand) reappears at Anton's bedroom door asking if his presence might help Paula recall that he was a character in her "curious dream." The Scotland Yard detective knows that Anton is a deceitful and fiendish husband - "dangerous to her" - and that his alias is Sergis Bauer: "So we've both ended our search tonight. And this is where Alice Alquist hid them [he holds up the gown], where all the world could see them and yet no one would know where they were except the man who gave them to her, watching from the royal box. Pretty clever of her to put four priceless jewels among a lot of pasted imitations."

Gregory: For the last time, what do you want of me?
Cameron: The jewels - and justice. How does it feel to have planned and killed and tortured for something and then to know it's been for nothing?
Gregory: For nothing?

They struggle together for control of Gregory's handgun and race into the attic, where a fight ensues and Williams is also summoned from the street for assistance. With Gregory tightly bound in a chair by ropes in the attic, Paula is given a few moments by Cameron to speak to her husband "alone." As Gregory valiantly pleads with her for help and tries to convince her of his innocence, she wields a sharp knife in front of his face, declines his pleas to cut his ties, and bitterly taunts and regales her trapped husband with his own abusive tactics - by acting mad:

Are you suggesting that this is a knife that I hold in my hand? Have you gone mad, my husband? Or is it I who am mad? Yes, of course, that's it. I AM MAD! (She tosses the knife away.) I'm always losing things and hiding things and I can never find them. I don't know where I put them. That was a knife, wasn't it? And I have lost it...I must look for it, mustn't I? If I don't find it, you'll put me in the madhouse. Where could it be now? Perhaps it's behind this picture. Yes, it must be here. No, no - where shall I look now? Perhaps I put it over here. Yes, I must have done that. (She opens a drawer and discovers the 'missing' brooch.) My brooch. The brooch I lost at the Tower. I found it at last - you see? But it doesn't help you, does it? And I'm trying to help you, aren't I? Trying to help you to escape. How can a mad woman help her husband to escape?...Yes, I am mad as my mother was mad.

Finding hidden strength, she scornfully and loathfully delivers a final vengeful statement to him that she is incapable of helping him - her poetic justice - before the wronged woman asks that he be taken away:

If I were not mad, I could have helped you. Whatever you had done, I could have pitied and protected you. But because I am mad, I hate you. Because I am mad, I have betrayed you. And because I'm mad, I'm rejoicing in my heart, without a shred of pity, without a shred of regret, watching you go with glory in my heart!

She races to the door to order Cameron to "take this man away." Before Williams leads him away with his hands bound to an awaiting coach at the front door, the malevolent Gregory explains to Paula the monstrous obsession that kept them apart:

I don't ask you to understand me. Between us all the time were those jewels, like a fire - a fire in my brain that separated us. Those jewels which I wanted all my life. I don't know why...Goodbye, Paula.

On the rooftop beneath a cloudy night sky, Paula is consoled by the stalwart Brian after her ordeal. She is promised support, friendship, and a hopeful future and relationship - as Miss Thwaites walks in on them [Note: Did she climb all the way up through the attic's skylight to the rooftop?]:

Paula: This night will be a long night.
Cameron: But it will end. It's starting to clear. In the morning when the sun rises, sometimes it's hard to believe there ever was a night. You'll find that, too. Let me come here and see you and talk to you. Perhaps I can help somehow.
Paula: (gratefully) You're very kind.
Miss Thwaites: Well!