In Egypt in 1249 A.D., Princess Shalimar
chafes under restrictions imposed by the Shaman, a mysterious
advisor who has insinuated himself into the confidence of Shalimar’s
father, Prince Selim, and keeps him drugged. Hoping to lift
the spirits of her oppressed people, Shalimar nightly swims out of
the palace via a secret aqueduct and performs at the Tambourine
Tavern as a scantily clad dancer named Taura.
One day, Prince Haidi, the son of the
Caliph of Bagdad, is traveling with his friend, Capt. Hussein,
to tell his father of their victory over a horde of invaders.
Haidi arrives in Shalimar’s town of Halwan at the same time as
Bedouin mercenary Rama Khan and his many soldiers. Khan, who
is in league with the Shaman and hopes to plunder Halwan, has
supposedly been summoned by Selim to guard him, although the people
make clear their hatred of him by pelting his men with rocks.
During the fray, Goghi, a thief befriended by “Taura,” knocks
Hussein from his horse with a rock, and while Haidi searches for the
assailant, Khan’s righthand man, Captain Kral, advises him to
kill Hussein so that they will be able to blame the people of Halwan
and have an excuse to conquer them. While Khan is stabbing
Hussein to death, Shalimar attacks Haidi with her dagger to prevent
him from apprehending Goghi. Shalimar inflicts a minor wound
on Haidi, whom she does not know, then swims back to the palace.
Dressed in her royal raiment, which
includes a veil and a different hairstyle, Shalimar is excited to
learn Haidi’s identity, for she hopes that he can summon the
caliph’s army and free her father. The Shaman forbids her from
leaving her room to meet their guest, but she nonetheless enters the
throne room, where her drugged father is telling Haidi that he fears
being assassinated by his own people. Haidi swears that he
will not leave Halwan until he has found Hussein’s killer, but when
Khan’s men bring in Goghi, Haidi forbids Khan from torturing the
prisoner and keeps him as a personal slave. Haidi then
questions Goghi about the tavern wench who wounded him, as he
believes that she can lead him to Hussein’s murderer.
Haidi and Khan then go separately to the
Tambourine, where they are captivated by the dancing of Taura, whom
they fail to recognize as Shalimar. After her dance, Shalimar,
who saw Khan stab Hussein, tells Haidi what she witnessed and asks
him to help her people. Haidi confronts Khan and engages in a
fierce sword fight with him, and Kral eventually knocks Haidi into
the water below the tavern’s roof. Shalimar jumps in after
Haidi and takes him to the palace, where her true identity is
revealed to him and the amazed Goghi. Haidi confesses his love
for Shalimar, but they are interrupted by a summons for Shalimar
from the Shaman.
In the throne room, Shalimar is told by
Khan, who still does not know that she is Taura, that Haidi has been
attacked by her people. Khan surmises that Haidi will bring
the caliph’s army to destroy Halwan and offers to kill Haidi first
if Shalimar will marry him. The Princess angrily declares that
she will commit suicide rather than become Khan’s wife, then storms
back to her rooms. There, Shalimar tells Haidi that he must
leave town to escape Khan, and although the prince states that he
will go to Bagdad and return with an army, after he and Goghi reach
the Tambourine, he decides to stay in Halwan.

With
the help of Goghi and a group of thieves loyal to Taura, Haidi leads
attacks on Khan’s soldiers, killing them one by one.
Meanwhile, in the palace, Babu, the tavern’s proprietor, has been
captured and tortured by Khan. Using the same drug he gives to
Selim, the Shaman induces Babu to reveal that Taura is Shalimar, and
that she goes between the palace and the town via the secret
aqueduct. Hoping to trap Shalimar into revealing her double
identity, Khan tells her that if the theives stop their attacks, he
will not exact any reprisals.
Shalimar swims to the tavern to tell her
friends the news but is briefly captured by soldiers before being
rescued by Haidi. Although Shalimar is upset that Haidi has
not left Halwan, he assures her that he will never leave without
her. Shalimar, Haidi and their men swim back to the palace,
but Khan’s plan to capture Shalimar if her hair is wet is foiled
when he bursts into her quarters, only to find her in her bath.
Shalimar’s handmaidens hide the thieves, then help to lure Khan’s
men to their chambers, where the thieves knock them out.
Meanwhile, Khan reveals to Shalimar that
he knows her secret and states that ten of her people will be killed
for every one of his dead soldiers the following day.
Desperate to avoid the massacre, Shalimar reluctantly promises to go
away with Khan in the morning and marry him. Shalimar then
returns to her quarters and tells Haidi about the bargain she has
struck. The young lovers spend the few hours before dawn
together, then Shalimar is forced to join Khan on his procession out
of Halwan. Haidi and his men rescue Shalimar, however, and
begin a prolonged battle with the Khan’s men. Haidi himself
defeats Khan, and the thief Little Tut kills the Shaman when he
attempts to hold Shalimar hostage. With peace restored to
Halwan, Shalimar agrees to accompany her beloved to Bagdad, and
Goghi and Tut look on with approval.