The film is about the attempts to keep alive the brain of a multimillionaire after his death, only to create a telepathic monster. The man then takes over the medical assistant's mind, and the "lady" of the title has to fight it.
Professor Franz Mueller (Erich von Stroheim) is the proud owner of his self-built advanced scientific laboratory set in an old castle in the middle of the dry Arizona desert. Mueller specializes in research on the human brain and is quite obsessed conducts experiments on brain tissue, believing that a human brain can be maintained even after a man's death. He also believes that the knowledge contained in a deceased person's brain can be transferred to another person.
Mueller is assisted in his attempts to prove his theory by another scientist, Patrick Cory (Richard Arlen), and his young Czechoslovakian-American ward, Janice Farrell (Vera Ralston).
Mueller is painfully aware of the fact that his assistants Cory and Janice are attracted to each other, but since Mueller himself is in love with Janice he does everything in his power, including abusing his powers as a boss to assign Cory to additional late night work and use the fact that the young man is far too devoted to his work, to keep the two love-birds apart and improve his own chances. When a plane crashes in the desert close to the laboratory one night, Mueller is asked by the rangers investigating the crash cause to take care of the only surviving man until a physician arrives. The man dies before the doctor gets there and is declared dead. The physician, Dr. Martin, reassures Mueller that someone will come to take care of the body the next day, but while waiting for that person, Mueller decides to test his theory about brain maintenance. With the help of his instruments Mueller is able to decide that the man's brain is still alive enough to use. Before the body is reclaimed he and Cory removes the brain. They are also able to determine, from searching through the dead man's clothes, that the body belongs to an infamous investment banker named William H. Donovan.
In the morning the wife of the late banker, Mrs. Chloe Donovan (Helen Vinson), arrives with the family lawyer, Eugene Fulton (Sidney Blackmer), to transport the remains from the castle. Upon arrival the lawyer inquires Mueller about the late Donovan's last words and Mueller tells him that there were none, since the man died without regaining his conscience after the crash. Not believing that Mueller is entirely truthful, Fulton remains in the nearby area to further investigate the last hours of Donovan's life before he was declared dead. Despite Janice's pleading Cory insists on staying at the castle to finish the experiment with the brain. Through spying on the castle Fulton finds out that Donovan's brain is still intact in a container, but he doesn't act to retrieve it from the scientists, but lets them continue the experiment, well aware of that Donovan didn't leave a penny for his wife in his will. Fulton has his own interest in the matter, since he is Mrs. Donovan's lover, and he secretly hopes that the scientist succeed in making the brain work, so he can extract information about where Mr. Donovan has hidden away his fortune.
When Mueller and Cory treat the brain with plasma, it gains the ability to communicate with the world through telepathy. The brain tells Cory that he must go to the Los Angeles Federal Prison. The plasma stimulation continues with higher and higher doses, even though Janice tries to interrupt the treatment, and soon Cory's brain is hijacked by late Mr. Donovan's brain entirely. Completely under the influence of Mr. Donovan's brain, Cory leaves for Los Angeles Federal Prison and manages to withdraw cash from one of Donovan's hidden accounts. He also manages to convince the police to re-open the investigation against a convicted murderer by the name of Roger Collins (William Henry). Still under the influence of Mr. Donovan, Cory visits Roger Collins in the prison.
Donovan's brain continues to keep complete influence over Cory. Through Cory it tries to force Fulton to help release Collins from prison, but Fulton refuses, claiming that there is too overwhelming evidence against him. A teenager named Mary Lou (Juanita Quigley) has witnessed the crime and as long as she sticks to her story the case is too strong. In an attempt to free Cory from the influence of Donovan's brain, Janice finds out from an investigator named Grimes (Charles Cane), hired by Mrs. Donovan and Fulton, that Cory is trying to bribe the witnesses to withdraw their statements. Grimes has knowledge of Donovan's dirty business and believes that there might be a connection between Collins and Donovan's earlier attempts to get rid of reluctant business counterparts. He also suspects that Donovan will try to get rid of Mary Lou in the same way, using Cory's body. It turns out he is right in his suspicion, as Cory forces Janice to go with him in the car when he tries to run Mary Lou over. When she stops him he tries to kill her instead.
In a sting of jealousy, Mueller's housekeeper and mistress-wannabe (Mary Nash) feeds sedarives to the brain and it loses its control over Cory, who regains his consciousness. The awakened Cory tells Janice that Collins in fact is Donovan's unknown son, and that Donovan was the one who committed the murder that Collins was convicted for. Having returned to the castle in Arizona Cory tries to abort the experiment, but is hindered by Mueller. They struggle and Mueller end up being shot by the housekeeper, and the brain is smashed to the floor. Cory goes on to help free Collins, and Janice waits for him to complete a short prison sentence for his involvement in the brain experiment.Vera Ralston as Janice Farrell
Richard Arlen as Dr. Patrick Cory
Erich von Stroheim as Prof. Franz Mueller
Helen Vinson as Chloe Donovan
Mary Nash as Mrs. Fame, the housekeeper
Sidney Blackmer as Eugene Fulton
Janet Martin as the café singer
William Henry as Roger Collins
Charles Cane as Mr. Grimes
Juanita Quigley as Mary Lou
Josephine Dillon as Mary Lou's grandmother
Antonio Triana as himself
Lola Montes as herself