Helen Corning wants Nancy to help her solve the case of her grandmother's haunted house. Before Helen and her aunt Rosemary Hayes arrive at Nancy's house, a man named Nathan Gomber goes to Nancy's home and says that Nancy's father is in danger because of the railroad case he is working on. He warns Nancy and the housekeeper, Hannah Gruen, to be careful and to stick close to Mr. Drew. Hannah has lived with Nancy and her father since Nancy was a toddler. After Nancy's mom died, the two became close. Nancy and Hannah listen to Nathan for a little while, and then they ask him to leave.
When Helen and her aunt arrive, they tell Nancy about what is happening at the mansion — things like unaccounted music, strange noises and missing personal items. They have gone to the police, but nothing abnormal was discovered.
Before taking the case, Nancy wants to talk to her dad. When he gets home, she tells him about Nathan's visit, and they discuss the details of the railroad case. The railroad company is constructing a bridge and has purchased property for the project. However, there is a problem with some of the paperwork from one of the property owners, so they are only able to start on part of the construction. The property owner is missing, and Nathan claims to be representing the owner. Mr. Drew tells Nancy that he is planning to go to Chicago the next day to follow up on a lead for the missing property owner. He encourages Nancy to take the haunted mansion case.
Nancy accepts the case and makes plans to go to the mansion. The next day, Mr. Drew and Nancy stop at the railroad bridge construction site. While they are talking at the edge of the river, a truck rolling down the hill almost runs over them. The truck goes into the water and sinks. As Nancy and her father are walking back up the hill to leave, Nancy notices fresh footprints. She suggests they might be one of the property owners or Willie Wharton, the missing property owner. Based on the size and freshness of the print, her father agrees that it might belong to Willie Wharton.
The next morning, after Nancy takes her father to the airport, she picks up Helen, and they drive to the Twin Elms mansion in a neighboring town. Aunt Rosemary greets them, and Nancy meets Helen's grandmother, Mrs. Turnbull (known to the family as Miss Flora). Miss Flora and Aunt Rosemary tell the girls that they discovered Miss Flora's pearl necklace was missing right before the girls arrived.
After the girls put their suitcases in their room, they start searching the house for the necklace or an intruder, but don't find anything. When Nancy suggests they report the theft to the police, Miss Flora says no. The two older ladies are afraid the police will think Miss Flora has just misplaced the necklace.
The girls go outside to see if they can find clues about how someone might have gotten into the house. Nancy notices a path leading to a neighboring mansion. Helen tells Nancy the property is the Riverview mansion. Twin Elms and Riverview used to belong to two brothers. The girls don’t find any clues.
While they are eating lunch, Nancy hears music coming from upstairs. It stops when Nancy reaches the second floor. No one is upstairs. The girls search the attic and cellar and don’t find any clues. Nathan knocks on the door, but Miss Flora refuses to see him. Nathan pushes his way inside. He wants to buy Twin Elms and has brought papers for Miss Flora to sign. Nancy asks him why he wants the property and why he doesn’t just buy Riverview since it is already vacant. She doesn't get a straight answer, and eventually Aunt Rosemary asks him to leave.
Nancy notices that Nathan walks away, instead of driving. Soon the parlor chandelier starts shaking. When Nancy goes upstairs, no one is there. She decides to do an experiment. Helen goes back downstairs to see if Nancy can make the chandelier move from upstairs. While Helen is downstairs, she sees a face in the window. Nancy and Helen go outside to search. They don’t find anyone. Miss Flora goes upstairs to rest while Nancy and Helen try their chandelier experiment again. This time Nancy is able to make the chandelier move.
After lunch Nancy and Helen begin to search for secret passageways. That evening, Nancy’s dad calls and says he will be delayed in Chicago. Nancy asks him for help when he gets back, and he agrees to help her. Then the ladies hear violin music upstairs. Once again, they can’t figure out where or who it is coming from. The ladies agree it is time to call the police again. This time Nancy calls, and the police say they will send a guard to patrol the area that night. Everyone goes to bed. In the middle of the night, Nancy thinks she sees someone outside, and an owl ends up in the house. Nancy and Helen get the owl out of the house. Nancy decides to explore outside.
Nancy runs into the man who was sent to guard their area, and she tells him what has happened. The man tells Nancy that the townspeople think Miss Flora is strange. Nancy defends her.
The next morning, Nancy and Helen investigate the icehouse, smokehouse and carriage house, and look for underground passageways on the grounds. After lunch, they look in the storerooms and the cellar. Once again, they don’t find anything. That night Hannah telephones Nancy about a telegram she got saying Mr. Drew would be delayed.
Later Nancy starts to wonder if something has happened to her dad because he didn't call her. To cheer up Nancy, Helen suggests they use the clothes they found earlier in the attic trunk to dress up. Aunt Rosemary suggests that after the girls get dressed, they dance to the minuet as Miss Flora plays it on the spinet. Nancy puts on a gown, and Helen finds a man’s costume so they will look the part of dancing partners. While the four ladies are downstairs in the library playing music and dancing, the guard lets them know that he's caught Albert walking across their property. Albert is a notary public and says he is taking a shortcut home.
The next morning Miss Flora and Aunt Rosemary spend the day gardening while Nancy and Helen investigate. When they don't find any clues, Nancy decides to set a trap. Since food and utensils have gone missing, she has a plan. Since Nancy thinks the house may be bugged, too, she writes Helen a note about her ideas. That night the girls set the trap, but they don’t catch the intruder, and the next day more food is missing.
Hannah calls to speak to Mr. Drew. When Nancy tells her that her father isn’t there, the two women realize that something has happened to Mr. Drew. Nancy calls the telegraph office and hotel to gather clues. The hotel clerk says her father checked out and was planning to take a train back, so Nancy goes to the train station. She finds a lady who rides the train and saw someone who looked like Nancy’s father get into a cab the day before. The driver is still in the station, so they talk to him. At first, he is scared to tell the truth, but he eventually tells them his story.
The driver had picked up Nancy's father at the station to go to Twin Elms. Two men pushed their way into the cab, and by the time they asked the driver to stop, Mr. Drew was unconscious. They removed him from the cab, and another car picked up all of them.
The woman gives Nancy names of hospitals in the area. Nancy calls, but her dad is not at any of them. Nancy calls Hannah, who suggests calling the railroad company lawyers. Nancy does, and they offer to help however they can. On the way back to Twin Elms, Nancy finds a cave entrance in a hill along the side of the road. In the rocks is a copy of a local newspaper with a hole in the classified section. As she goes back to her car, she sees someone who matches the cab driver's description of one of the men. When Nancy gets closer to the car, the man runs away.
Nancy chases the man, but he escapes. When Nancy gets back to Twin Elms, she calls the police. Nancy also calls Hannah. The classified section that was missing was from a used car dealership. Nancy goes to the police station. While she is there, Helen calls and asks Nancy to come back to Twin Elms. When Nancy gets back, she finds that Miss Flora has fainted, and the doctor has been called.
After dinner, Nancy and Helen look for a secret passageway. This time, they do discover one in the parlor. A note on the floor from years ago reveals that the house had what was called "listening posts." The kitchen used to be a servant's sitting room, and when someone stands at the end of the corridor the person can hear the conversation in the kitchen.
The next morning Hannah calls to tell Nancy that the railroad company's lawyer phoned to tell them that they needed to move forward with construction and that they would have to have any new evidence by Monday. Nancy and Helen go into town to do some shopping and talk to the police. When they get back to Twin Elms, they see Nathan leaving and decide to follow him. They lose him in the town of Hancock.
At Twin Elms, the girls find that Miss Flora signed the papers to sell the property to Nathan. The doctor is called again, but Miss Flora refuses to go to the hospital. Nancy decides she will ask the realtor if she can go inside the Riverview mansion the next day to look around. That night the girls discover a trap door in the Twin Elms attic and lookout towers on the roof. Aunt Rosemary remembers her parents talking about a trap door. When Nancy and Helen see the realtor the next day, Riverview has already been sold to Nathan, and the realtor won’t let them go into the house.
Nancy gets a call from the police chief. They have arrested a man named Samuel Greenman. Greenman is the man Nancy saw near the cave. Harry, the cab driver, is also at the station. Captain Rossland asks Nancy to talk to Greenman and the cab driver to get information. Nancy is successful in her efforts, and she heads back to Twin Elms. Nancy calls a lawyer at the railroad company and asks him to come to Twin Elms on Monday. The girls search the Riverview mansion grounds. When they get back to Twin Elms, they have a visitor. The realtor has changed his mind and gives them the key to look inside the Riverview mansion.
The next morning the girls go to Riverview. In a bedroom closet, they discover a secret passageway. As they start to walk down the passageway, a man stops them. It is Willie Wharton. He tells them all about the pranks and antics he did as the ghost of Twin Elms. He says Nathan asked him to play the part of the ghost.
But Willie Wharton wasn't a part of the kidnapping scheme that involved Nancy's father. Nancy asks Willie Wharton to go to Twin Elms, and he agrees. He tells the lawyer that the signature on the contract is his and then fills out the rest of the paperwork. Albert is called to notarize everything.
With her father still missing, Nancy calls to ask for help from the police. She thinks her father might be in the secret passageway they have just discovered. Nancy and Helen show the secret passageway to Miss Flora and Aunt Rosemary. The police come. Nancy and Helen go into the passageway to look for Mr. Drew. They find him in one of the locked rooms off the passageway. He is groggy but alive. The policemen help bring Mr. Drew upstairs where Nancy and the others tell him what has happened.
While they are talking, another policeman comes to the door. Nathan has been arrested and has confessed. Miss Flora's stolen property has been recovered. The last accomplices have also been caught. Mr. Drew proudly acknowledges Nancy’s efforts and success.