Americans use a merchant ship as a decoy to sink a German U-boat in 1918.
Naval reserves are sent on a secret mission in a schooner armed with a big cannon on a swivel and towing a submarine in order to sink the German U-boat 172. Captain Bob Kingsley (George O'Brien) instructs the crew to act like a merchant ship. Thurston is to play the captain's wife in the panic they rehearse. They go into a port of Spain to get supplies and give the men liberty. Kingsley gets a photo of Anna Maria (Marion Lessing) and a ship in the harbor even though it is forbidden. The German officer Franz Shiller (John Loder) tells Maria about the Americans. Lolita (Mona Maris) sings, dances with Ensign Cabot (Steve Pendleton), and gives him wine in her room, causing him to pass out. Franz toasts to meeting Kingsley again. Kingsley sends a search party for Cabot but has to leave without him. The Germans pay Lolita for her services. Cabot sneaks onto the German ship. Maria greets the German captain. As fuel is transferred from this ship to U-172, Cabot damages the ship and sets the fuel on fire before being shot and dying. The German sailors find the leak, but their ship sinks.
The Americans find the burning oil, the body of Cabot, and the German lifeboat. Kingsley has Maria taken as a prisoner to his cabin and sends the rest to shore. Maria claims she is Danish and then Swedish and tries to escape on a boat. She says Kingsley liked her, but her brother commands U-172. She asks Kingsley where his uniform is and says they know about the "American mystery ship." U-172 surfaces to use its gun. Maria hoists flags but is stopped. Men get in a boat with Maria in their act of panic. The rest of the men hide on the ship and pump water as the ship takes shells. Kingsley tells the submarine commander to cast off the tow line and sends more men overboard as the ship burns. Finally the U-boat comes within range. Kingsley orders firing and raises the flag. The submarine fires a torpedo, and U-172 is sunk. The German survivors are taken prisoner. Maria says Kingsley won. He says he lost what he cared for. She says no, but she must go with her brother, promising to come back to him later. In the final scene the Germans are marched off.
In this story enemies at war can interact peacefully in a neutral port but endeavor to destroy each other on the high seas. National loyalty prevents Maria from leaving her country for the man she loves.