Harry Palmer, a sergeant working for a Ministry of Defence organisation, is summoned from a stakeout by his boss, Colonel Ross. Ross tells him he is to be transferred to a Home Office counter-espionage unit headed by Major Dalby. Palmer is replacing an agent killed that morning while trying unsuccessfully to prevent the kidnapping of Radcliffe, a British scientist. Dalby introduces his team, including Jean Courtney, who deliberately ignores him, and 'Jock' Carswell, who quickly befriends him. Dalby sends them to find Eric Ashby Grantby, a native of Albania, and his chief of staff, known only as 'Housemartin'. Dalby believes Radcliffe is being held for ransom and that Grantby must be responsible.
Using a Scotland Yard contact, Harry locates Grantby, who gives Harry a piece of paper with a contact number on it. Harry tries the number from a phone booth, but it doesn't work. He tries to stop Grantby leaving, but Housemartin attacks him and the two get away. Later that day, Harry goes home and finds that Jean has been sent there by Dalby to check up on him. The two become friends.
Some time later, Jock and Harry learn that Housemartin has been arrested, but by the time they reach the police station, they find that men impersonating them have killed him. A search of the warehouse where Housemartin was picked up reveals only a piece of audiotape marked 'IPCRESS'.
Shopping at a supermarket, Harry is approached by Ross, who asks him to spy on Dalby's activities. Harry refuses. Although Harry thinks Jean is spying for Ross, he decides to ignore it and soon they become lovers. Contact with Grantby is re-established and a deal struck for Radcliffe's safe return, but while the exchange goes as planned, Harry sees a man suddenly move towards them and fires. The dead man turns out to be a CIA agent who has also been following Grantby. Harry is threatened by another CIA operative, who says he will kill him if he discovers that the death was not a mistake.
Some days later, it becomes clear that while Radcliffe is physically unharmed, his mind has been affected and he can no longer function as a scientist. Jock tells Harry that he knows what IPCRESS means, showing him a book entitled 'Induction of Psychoneuroses by Conditioned Reflex Under Stress'. The scientist has clearly been brainwashed. Jock borrows Harry's car to test his theory on Radcliffe, but he is killed before he reaches him. Harry realises that he must have been the intended target and decides to move in with Jean until the situation is resolved.
Returning to the office, he finds that the IPCRESS file compiled by Jock, relating to 17 other scientists, all of whom have also been brainwashed, has been stolen from his desk. Harry goes back to his flat to collect his belongings, and finds the body of the second CIA man. Believing he is being set up, he tells Dalby what has happened. Dalby tells him to leave town for a while. While on a train to Paris, Harry is apprehended by Grantby's men.
After several days in a cell and denied sleep, food and warmth, Harry is told that he has been taken to Albania. Having read the file, Harry realises that this treatment is part of the conditioning for the brainwashing procedures to come. During the procedure he clasps a nail taken from his cell in his closed fist to distract himself. After many sessions in which Harry is hypnotised and conditioned with electronic sounds and disorientating images, he appears to succumb. Grantby instills a trigger phrase that will make Harry act unconsciously against his will and follow any commands given to him.
Harry eventually overcomes his guard, takes his gun and escapes. Reaching the street, he realises he is still in London. He phones Dalby, who is actually in league with Grantby. Dalby uses the trigger phrase, making Harry call Ross to the warehouse. When Dalby and Ross arrive, Dalby again uses the trigger phrase to try to convince Harry that Ross is the traitor. Harry frees himself from the indoctrination by recalling the pain to his hand and shoots Dalby in self-defence.
