It's 1957 and archaeology professor and explorer Indiana Jones (HARRISON FORD) has just been unceremoniously dumped, along with his friend 'Mac' George McHale (RAY WINSTONE), from a car trunk onto the ground outside Hanger 51 at a U.S. military base in Nevada. They've been brought there by Irina Spalko (CATE BLANCHETT) who once worked for Stalin but is now employed by the KGB to try to find a way for the Russians to win the Cold War.
She thinks the answer lies with paranormal powers and thus is searching for a legendary crystal skull reportedly stolen centuries ago from the long lost mythical city of Akator somewhere in the Amazon jungle. Rumor has it that if the skull is returned, it will give its possessor untold powers. Under duress, Indiana helps her get a step closer to finding what she seeks, but he manages to escape.
The fact that Mac has turned sides, however, has the FBI suspicious that Indy might be a commie sympathizer, and that results in a coerced, indefinite leave of absence for him from his college. On his way out of town, he's stopped by Mutt Williams (SHIA LaBEOUF), a young biker who informs him that their mutual friend, Professor Harold Oxley (JOHN HURT), has been captured and is going to be killed.
Indy learns that Harold was also after the legendary crystal skull, so he and Mutt end up headed for Peru on a rescue mission. There, they not only run into Irina and her team of Russian soldiers, but also Marion Ravenwood (KAREN ALLEN), Indy's long-ago past love. From that point on, they try to rescue Harold, who's fallen under the crystal skull's powers, and elude Irina and her men, all while attempting to return the skull to its rightful home.