The film begins with John Cutter explaining the three acts of a magic trick. Simultaneously we watch as Robert Angier performs his trick of making himself disappear all while Alfred Borden sneaks under the stage to discover that Angier is drowning in a tank with a blind man sitting near by.
We then see Angier and Borden working together under Cutter to perform magic. And during one trick Angier's wife is killed when she is unable to escape from the underwater tank she was tied up and put into. Angier blames Borden for her death, accusing him of tying a knot she couldn't get out of. The men go their separate ways and begin their own magic careers. Borden initially the more spectacular as he performs a trick where he exits a door on one side of the stage while simultaneously entering another on the other side of the stage. Angier cannot figure out how he does it and he makes it his sole mission to figure out how he does it so he can use it himself.
Angier then has his assistant Olivia spy on Borden in order to steal his trick, but Olivia ends up falling in love with Borden and becomes his assistant. Eventually Angier, angered by the turning of the tables and still consumed by the death of his wife he confronts Olivia to take Borden's diary - which she gives him. He learns there is a key word necessary to decipher the diary and Angier threatens to kill Fallon, the stage engineer for Borden who also works with Olivia. She then gives him the key: TESLA.
After deciphering the diary he learns that he needs to go to America in order to seek out the inventor, Nikola Tesla. Angier believes the inventor built a machine for Borden's trick and he wants Tesla to do the same for him. But Tesla denies ever having built the machine, but is willing to begin making one for Angier. The result is a machine that doesn't transport objects, but duplicates them. Tesla is driven out of his home/laboratory in Colorado Spring, Colorado by his rival Thomas Edison, but he leaves behind the machine for Angiers with a note that tells him he shouldn't use it, but rather should destroy it.
Back in London we see that Borden's wife commits suicide because of his personality being erratic, one day in love with her and others despising her. And we then see Borden confess his love to Olivia, but eventually Olivia leaves Borden as she sees that the feud between him and Angiers is the sole focus of the magician's life and she won't stay for that.
Angier's finally reveals his new machine in London, calling the trick, "The Real Transported Man." And he teleports from the stage to the balcony of the theater. We then see Borden sneaking backstage from the opening scene. He watches Angier as he is drowning in a tank and Cutter then catches Borden under the stage and takes him to the police for killing Angier. He is sentenced to death by the courts. While awaiting his execution he is visited by Lord Caldlow who says he'll take care of Borden's daughter, Jess if Borden gives him his magic tricks. Borden agrees and Caldlow rips up the tricks and reveals that he is actually Angier.
Cutter realizes that Angier is still alive he figures out that he's participated in having Borden executed. He decides to help Borden get rid of Tesla's machine. Borden is hanged. We see Angier enter the theater when another man comes in and shoots him, and then reveals that he is Borden. Borden says that he was one of two identical twins that shared an identity. This is how they performed their trick, going so far as to make sure that every scar was identical - even cutting off a finger after Borden lost his - so that no one could tell them apart, not even those they loved. Borden reveals that he loved Sarah and his brother loved Olivia. We learn that Angier's trick with Tesla's machine produced a new version of Angier every time he performed it, and the original was drowned beneath the stage. As Angier dies he drops his lantern and the fire burns down the theater revealing rows of drowned versions of Angier beneath the stage.
