The principal of Bedford High asks 18-year-old Nancy Drew to attend the high school undercover, posing as a transfer student. He wants her to solve the mystery of vandalism and missing video equipment at the school.
Nancy's best friends, Bess Marvin and George Fayne, go shopping with her to help her pick out clothes for the job. Once they arrive home, the Drews' housekeeper brings in an envelope containing a videotape of the girls shopping. It warns Nancy not to solve the case. The audio on the tape has been electronically manipulated so that the person's voice is disguised.
On the way to school the next morning, Nancy and the driver of a Porsche notice each other at a stoplight and flirt. Nancy loses sight of him when she turns into the school parking lot. Once at school, Nancy meets with the principal. He explains that someone is breaking into the locked file cabinets in the offices, but he is not sure what, if anything, is being taken because the files are left in disarray. School video equipment has been stolen, but then sometimes returned. And someone has broken into a handful of student lockers.
The principal then introduces Nancy to Daryl Gray, a senior at the school who will help Nancy find her way around the school. Daryl is the owner of the Porsche. Only the principal and Daryl know why Nancy is there.
On the way to their homeroom classrooms, Daryl introduces Nancy to some of the students they meet in the hallway. After lunch, Nancy starts her investigation by looking for the video lab. At the top of a staircase, she hears the voices of Jake Webb and Walt Hogan, before Walt sees her and pushes past her. Jake verbally threatens Nancy.
Later, Daryl asks Nancy to the school dance, and she accepts. At the end of the day, Nancy tries again to find the video lab. Before she can reach it, Connie Watson invites her to go to the football game. Once there, the two chat about Carla Dalton, who Daryl has dated off and on, that she still likes Daryl and how Daryl's family lost part of the family fortune in a bad business deal. Nancy notices and admires the bracelet on Connie's wrist. Connie doesn't know anything about the thefts and vandalism at the school.
During gymnastics the next morning, Carla doesn't spot for Nancy as she should, and Nancy falls to the floor. In her next class, Nancy notices Hal Morgan copying her quiz answers. Between classes, Nancy overhears Jake pressuring Hal to write an essay for him. During lunch, Nancy searches Jake's locker and finds Connie's bracelet. Nancy approaches Connie about it, but Connie denies that the bracelet is hers. Nancy sees Jake as the common denominator in what is happening at the school. However, she is not sure exactly how he is involved.
Nancy finds the video lab and is surprised to see Daryl in it. The two go out for a soda. As they are driving, Nancy's brakes fail. She stops the car by driving into an embankment. She discovers that the brakes have been tampered with. As Nancy is telling Daryl, she smells gas. She thinks the gas tank might have cracked as they drove over a rock. She starts to move away from the car and then realizes Daryl isn't behind her. Daryl is trapped in the car. Nancy goes back and pulls him out just before the car explodes. Daryl and Nancy comfort each other and kiss for the first time. After the embrace, Nancy tells Daryl that she thinks Jake cut her car's brake cable. She remembers the altercation with Jake on the steps and the anonymous videotape she got before starting the case. She wonders if Jake is trying to stop her from solving the case. Nancy plans to talk to Jake and ask him about it at school the next day.
Bess and George drive Nancy to school the next morning. When she arrives, she finds that Jake is dead. He fell down a school staircase. Daryl tells her that the principal wants her to investigate the murder, too. Nancy looks in Jake's locker again and finds wire cutters, a battery pack, the bracelet she saw Connie wearing, filled-in SAT exams and a school newspaper article about Walt suffering an injury during a football game. Walt is interested in playing pro football, and the newspaper article indicated an injury that might jeopardize a college scholarship and his ability to play in an upcoming championship game. Nancy thinks the wire cutters could have been used to snap her brake cable and that Jake probably took the battery pack from the school's lab to use it to record her, George and Bess. While the battery pack and SAT exams seem to point to Jake being the school vandal, she isn't sure why Jake had the other things in his locker or how everything is connected.
As Nancy is closing the locker, Brenda Carlton finds her. Brenda wants to get a story for her father's newspaper. Nancy proposes that Brenda can have an exclusive story, once the case is solved, if Brenda keeps Nancy's name out of it. Brenda agrees.
Nancy goes to the video lab. She finds a tape that shows Walt wrapping his rib cage before a game. Not wanting to be seen watching this video in the school lab, Nancy takes the tape and leaves. Bess and George watch the tape with Nancy. They also see Connie shoplifting a bracelet and Hal taking SAT answers from the counselor's office. Nancy thinks Jake made the tape and blackmailed these students and sent her the shopping tape. The three girls wonder if Walt, Connie or Hal killed Jake.
The next day, Nancy tells Daryl about the tape and tries to talk to Hal, Walt and Connie. Hal denies everything. Walt becomes angry, but Connie eventually breaks down and tells Nancy the whole story. Jake caught her shoplifting and was blackmailing her. When Connie wanted to return the bracelet, Jake wouldn't let her. Instead, he told her to wear it to school and then he kept it. Connie insists she wasn't the one who killed Jake.
Daryl is waiting for Nancy in the parking lot after school and asks to watch the tape to help Nancy find more clues. They go to Nancy's house to watch the videotape, but Nancy's friends stop by so Daryl leaves. Ned Nickerson, Nancy's on-and-off-again boyfriend, calls and says he is coming in from college for the weekend. When Nancy gets off the phone, the three girls find that the tape had more on it than they originally thought. Daryl is also on the tape. He meets with a man in a diner parking lot and then drives past the high school to another property.
Nancy and her friends retrace Daryl's steps and turn into a driveway with a gate that has a Soviet Union (USSR) sign on it. The girls think that it is a diplomatic compound. As they sit in its driveway, a car drives toward them, and men with guns jump out of the bushes. They drive away, but a van follows them, rear-ending their car at a stoplight. They lose the van only after they pull into a crowded restaurant parking lot.
Nancy decides to confront Daryl the next night at the dance, with the help of her friends, including Ned, who is now home. During the dance, Nancy tells Daryl that she saw him on the videotape and suspects that Jake had figured out his involvement in a spy operation and was blackmailing him. When Nancy asks Daryl if he killed Jake, he physically threatens her. Nancy's friends rescue her.
Eventually, Daryl admits he was a courier for the spy ring and that Mitch Dillon, the man Daryl met at the diner, killed Jake because Jake tried to blackmail him, too. Mitch wanted Daryl to get the tape. Nancy asks Daryl to help them catch Mitch. Daryl agrees and sets up a meeting to give Mitch the tape. The police work with Nancy on this sting.
When Mitch unexpectedly moves up their meeting time, the teens are not able to let the police know, but they proceed as planned. Brenda almost ruins everything by trying to get her story early, but Daryl does his part, and Mitch is caught.
The next day Nancy meets with the principal to explain what Jake was doing and who killed him. Brenda writes her story, and it's on the front page of the school newspaper. According to her and Nancy's agreement, Nancy's name has been left out. Daryl has been arrested, however there is hope that his cooperation in helping catch Mitch will help his case. When faced with what they did, Hal, Walt and Connie take responsibility for their actions and face the consequences. Ned picks up Nancy from school, and she tells him about Daryl. He forgives her. They kiss and leave the parking lot.