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In Paris in 1850, at a reception given by Louis Napoleon, the nephew of Napoleon Bonaparte and president of the French Republic, a swami fortune-teller predicts that Countess Eugenie De Montijo of Madrid, to whom Louis has taken a fancy, will lead a troubled but great life and will wear a crown.  The swami next predicts that Eugenie's escort, Ferdinand de Lesseps, the son of the consul-general to Egypt and one of the Foreign Offices' most promising young diplomats, will dig ditches.

After Louis sees Ferdinand making fun of his desire for the throne, Louis orders him sent to Egypt's consulate.  Eugenie, pleased that Louis has shown an interest in her, declines Ferdinand's marriage proposal, but cries after he leaves.

In Egypt, which is a province of the Turkish Empire, Toni Pellerin, the precocious granddaughter of the ranking sergeant of the consulate, falls in love with Ferdinand, who is given the assignment to cultivate the young Prince Said, the pampered son of Viceroy Mohammed Ali.  During the Viceroy's annual tour of inspection to the Isthmus of Suez, Toni rides after Ferdinand into the desert, where they take cover from a storm in some ruins.  She confesses her love, but Ferdinand, still in love with Eugenie, gently rebuffs her.  When they see a rainbow, Ferdinand imagines a canal connecting the Mediterranean and Red Seas, which would benefit the whole world, and realizes the meaning of the swami's prophesy.

With Toni as his secretary, Ferdinand goes to Paris to organize a stock company to finance construction.  Louis Napoleon, however, refuses to give his support.  When rioting in the streets breaks out, members of the assembly, including Ferdinand's father, fear that Louis has provoked the riots so that once the assembly adjourns, he can declare himself emperor in the resulting chaos.   Eugenie, now Louis' mistress, seeks a disheartened Ferdinand's help to convince his father to urge the assembly to disband. Ferdinand's trust of Eugenie and Louis' signed promise to reconvene the assembly, once the rioting is quelled, succeeds in convincing Ferdinand's father.

However, once the assembly adjourns, its members, except for Ferdinand, are arrested, his father dies of a stroke, and Ferdinand is thought to have deceived his father and friends so that the canal, which Louis is now prepared to support, can be constructed.  Ferdinand refuses to continue with the canal until Toni, encouraged by Eugenie, persuades him to proceed with his dream.

Despite an incident of sabotage when Turkish soldiers dressed as Arabs dynamite the hills surrounding the canal, it nears completion until Louis, now an emperor with grandiose ambitions, bends to pressure to halt construction from England, whose support he needs against Prussia.

Ferdinand travels to London, where the Prime Minister, who thinks England should not concern itself so much with its colonies, rebuffs him.  However, the leader of the opposition, Benjamin Disraeli, who wants to preserve England's role as a leading power, promises support if he wins the upcoming election.  Said, now Viceroy, provides funds to keep the work completed from being destroyed by shifting sands, but a simoon blows in and threatens the lives of the workers.  When Ferdinand, trying to help, is knocked cold by a flying board, Toni secures him to a post before she is blown away and killed.  At her burial, Ferdinand concedes defeat.  However, when Disraeli is victorious, England joins with Ferdinand to complete the canal.

After Eugenie, now the Empress, presents Ferdinand with the Distinguished Service Award, he goes alone into the desert, where he overlooks the canal and remembers Toni's words that she would be there with him at the canal's completion.