While on vacation in Los Angeles, Tom Lawrence (Tom Conway), aka The Falcon, meets Inspector McBride (Emory Parnell) at the Hollywood Park Racetrack, asking him about casino owner Louie Buchanan (Sheldon Leonard). Tom helped put Louie away but does not know about his present whereabouts.
Returning to his seat, Tom finds Louie seated one row behind. Seated next to Tom is actress Lili D'Allio (Rita Corday); and, when she leaves to make a bet, Peggy Callahan (Barbara Hale), Louie's girl friend, takes her spot and accidentally takes Lili's purse. Tom hails a cab, driven by wisecracking Billie Atkins (Veda Ann Borg), trying to catch up to Peggy who is an actress at the Sunset Studio.
Hearing a gunshot, Tom rushes to a deserted sound stage where he finds a corpse; but, by the time the police arrive, the body is missing. After finding the missing body in a prop room, Billie identifies the deceased as leading man Ted Miles, who was married to Roxanna (Jean Brooks), the studio's costume designer. Bringing autocratic director Alec Hoffman (Konstantin Shayne), whom she says we will marry, Roxanna exhibits no emotion when shown her former husband's body.
Everything seems to be tied to a current production produced by neurotic studio executive Martin Dwyer (John Abbott). Accompanied by Billie, the Falcon pokes around a studio. Suspects are starlet Peggy Callahan, haughty prima donna Lili D'Alio or shady "businessman" Louie Buchanan.
Police Inspector McBride (Emory Parnell) questions Martin Dwyer, who seems to have a rock-solid alibi, until his gun shows up in the model shop, hidden in a plaster head. When he produces proof that his gun was reported as stolen, suspicion falls on Hoffman, who is arrested but gets out on bail. The "jinxed" film goes back into production, with a scene set at Lili's pool.
When a prop gun is mysteriously loaded with live ammunition, Peggy shoots Hoffman at poolside. While McBride questions the crew about the shooting, Tom finds Peggy and Louie conferring in secret, with Louie promising to deliver the killer the next day at the Los Angeles Coliseum. When Louie arrives, he begins to stumble and dies on the steps. Tom finds a poisoned ring, like the one once owned by Dwyer. With the police homing in on him, Dwyer makes a break for the studio soundstage, where he is confronted by Tom and, after a furious gun battle, is shot and apprehended.
Tom concludes that Dwyer has sold eight investors a 25% interest in the film. He murdered Ted Miles and Louie Buchanan because they knew too much.
RKO studios doubled for the fictional Sunset Studio in The Falcon in Hollywood.
In his review of The Falcon in Hollywood, Bosley Crowther wrote, in The New York Times, "A mild intra-mural excursion around a movie studio is the only intriguing feature of RKO's 'The Falcon in Hollywood,' latest in the well-worn mystery series, which came to the Rialto yesterday. For otherwise this obvious whodunnit about murder on a studio set is just another indifferent workout for Tom Conway as the suave, intuitive sleuth. The backgrounds of picture-making are uncommonly interesting and lead one to wonder sharply why they haven't been used to more avail. But the story itself is as feeble and hackneyed as a prop telephone." In a recent review of the Falcon series for the Time Out Film Guide, Tom Milne wrote, "Conway, bringing a lighter touch to the series (which managed its comic relief better than most), starred in nine films after The Falcon's Brother, most of them deft and surprisingly enjoyable."