Ivan Igor (Lionel Atwill) is a sculptor who operates a wax museum in 1921 London. He gives a private tour to a friend and an investor, showing them sculptures of Joan of Arc, Voltaire, and his favorite, Marie Antoinette. Formerly a stone sculptor who did wax modeling as a hobby, he explains he turned to wax sculpting completely because he felt more "satisfied" that he could reproduce "the warmth, flesh, and blood of life far better in wax than in cold stone". The investor, impressed by his sculptures, offers to submit Igor's work to the Royal Academy after he returns from a trip.
Unfortunately business at the museum is failing due to people's attraction to the macabre (a nearby wax museum caters to that). Igor's partner Joe Worth (Edwin Maxwell) proposes to burn the museum down for the insurance money of £10,000. Igor won't have it, but Worth starts a fire anyway. Igor tries to stop him, and he and Worth get into a fight. As they fight, wax masterworks are melting in the flames. Worth knocks Igor unconscious, leaving the sculptor to die in the fire. Igor survives, however, and reemerges 12 years later in New York City, reopening a new wax museum. His hands and legs have been badly crippled in the fire, and he must rely on assistants to create his new sculptures.
Meanwhile, spunky reporter Florence Dempsey (Glenda Farrell), on the verge of being fired for not bringing in any worthwhile news, is sent out by her impatient editor, Jim (Frank McHugh), to investigate the suicide of a model named Joan Gale (Monica Bannister). During this time, a hideous monster steals the body of Joan Gale from the morgue. When investigators find that her body has been stolen, they suspect murder. The finger initially points to George Winton (Gavin Gordon), son of a powerful industrialist, but after visiting him in jail, Florence thinks differently.
Florence's roommate is Charlotte Duncan (Fay Wray), whose fiancé Ralph (Allen Vincent) works at Igor's new wax museum. While visiting the museum, Florence notices an uncanny resemblance between a wax figure of Joan of Arc and the dead model. At the same time, Igor spots Charlotte and remarks on her resemblance to his sculpture of Marie Antoinette.
Igor employs a couple of shady characters: Prof. Darcy (Arthur Edmund Carewe), a drug addict, and Hugo (Matthew Betz), a deaf-mute. Darcy also works for Joe Worth, now a bootlegger in the city, among whose customers is none other than Winton.
While investigating an old house where Worth keeps his bootlegged alcohol, Florence discovers a monster connected with the museum, but cannot prove any connection with the disappearance of Joan Gale's body. Darcy is seen running from the house and is caught by the police. When brought to the station, he eventually breaks down and admits that Igor is in fact the killer and that he has been murdering people (including a missing judge whose watch was found on Darcy's person), stealing their bodies, and dipping them in wax to create lifelike statues.
Charlotte, visiting Ralph at the museum, is trapped there by Igor, who it is revealed can still walk. When Charlotte tries to get away, she pounds away at his face, breaking a wax mask that he has made of himself, to reveal that he had been horribly disfigured. He also shows her the dead body of Joe Worth, whom Darcy had been tracking down for him for some time. When she faints, he ties her up and sets her on a table, intending to douse her with molten wax and make her his lost Marie Antoinette. Florence leads the police to the museum just in time: for a man supposedly crippled by fire, Igor moves with surprising speed and agility, successfully fighting off the police, but is finally gunned down. He falls into a giant vat of wax, which was intended for Charlotte. Charlotte is saved when Ralph moves away the table she is tied to from where the wax is about to pour onto her.
When Florence reports her story to her editor, Jim, he proposes to her. Having to choose between money (Winton) and happiness (Jim), she picks the latter.
The film is based on an unpublished short story, "The Wax Works", by Charles S. Belden, who had also written a play called The Wax Museum, which has been optioned by Charles Rogers, an independent producer. This had been discovered by Warner's copyright attorney, but the studio optioned the story from Belden for $1,000 before getting the attorney's report. Rogers dropped his option on the play when threatened with a lawsuit from the co-author of a Broadway play with a similar plot.
A follow-up to Warner's 1932 horror success Doctor X, Mystery involved many of the same cast and crew, including actors Lionel Atwill, Fay Wray, Arthur Edmund Carewe and Thomas Jackson; director Michael Curtiz; art director Anton Grot; and cameraman Ray Rennahan. The film also re-used Doctor X's opening theme music by Bernhard Kaun.
Mystery of the Wax Museum was the last feature film under a 1931 Technicolor contract. Warner had already noted the public's apathy with the artificial color system. Technicolor was greeted with hostility by critics and public awash in its unreal hues and humdrum quality control since 1929. The considerable additional expense of the compromised two-color spectrum, which was a fine idea when color was a novelty, was now anathema. Warners had tried without success to get Technicolor to permit them to swap out the last feature commitment for a series of shorts, but when the studio violated the contract by filming Doctor X with an additional black-and-white unit – thereby permitting them to process prints at their own lab and avoid paying Technicolor thousands of dollars – Technicolor dug in their heels and refused. Consequently, Mystery of the Wax Museum was the last studio feature in the two-color Technicolor system. Technicolor founder Herbert Kalmus declaring it "the ultimate that is possible with two components." Apparently the combination of the two-color process with the lighting of Rennahan and the set designs of Grot created an unreal atmosphere that worked well for the film's story.
The process combined red and green dyes to create a color image with a reduced spectrum. (Technicolor would introduce their three-negative process in 1932 with Flowers and Trees, cutting an exclusive deal for animation only with Walt Disney. Warner Bros. was the first to use the new process commercially for live-action on shorts like Service With a Smile in 1934).
Unfortunately, the extremely bright light required for filming under the Technicolor process melted the wax figures, and they instead had to be played by actors. Some actors even received eye damage from the lights.
Upon its release, Time magazine felt it was a good mystery film but was disappointed with the abrupt ending and lack of an explaining-it-all scene. However Mordaunt Hall of The New York Times wrote: "It is all very well in its way to have a mad scientist performing operations in well-told stories, but when a melodrama depends upon the glimpses of covered bodies in a morgue and the stealing of some of them by an insane modeler in wax, it is going too far." Hall found it "too ghastly for comfort" – although he praised the comic performances of Glenda Farrell and Frank McHugh. The Variety reviewer said that the story was "loose and unconvincing" but liked the gruesome makeup and said that the film should do well at neighborhood cinemas.
At the box office, the film did better in Europe than it did in the US, but still made a profit of $80,000.
The color version of Mystery of the Wax Museum was never formally reissued and over time came to be considered a lost film. In 1936, Technicolor-Hollywood ceased servicing two-color printing after issuing a "last call" to their customers for prints and converting the final imbibition rig for three-color. The response of most studios was to junk the two-color negatives (which had been stored at Technicolor) of their now-obsolete films. Warner Bros. seems to have kept the negatives for only their two-color cartoons. By the late 1950s, when this film was being sold in a package for television, the Technicolor version was thought to be lost, since Technicolor discarded most of their 2-color negatives on December 28, 1948.
William K. Everson reported that Warner's London exchange kept a 35 mm color print on hand and that the film screened there in the late 1940s. A 35 mm nitrate copy of Reel 1, the "lab reference" print, was still held by Technicolor-Hollywood and screened privately in the 1960s; that reel is today in the collection of the Academy Film Archive. After the death of Jack L. Warner on September 9, 1978, a print was discovered in his personal collection. With much fanfare, the color version was screened at Grauman's Chinese Theatre in Hollywood, with Fay Wray in attendance, and then at Alice Tully Hall as part of the 8th New York Film Festival.
The film was remade as House of Wax (1953), directed by Andre De Toth and starring Vincent Price. Whereas the original was more of a mystery film, the remake focused more on the horror elements. However, both films did have one unusual tendency in common: Mystery was filmed in the early two-color Technicolor process, and House of Wax showcased two other then-novel film technologies, 3-D and stereophonic sound. A wax-museum-set TV pilot, Chamber of Horrors (1966), was released as a theatrical feature and offered its own gimmick, a "horror horn" that would blare as the image flashed red prior to scenes of violence and murder.