In London in 1940, German bombers, drawn by a signal from Sally Maitland, a British Nazi sympathizer, drop their bombs on Buckingham Palace. When British soldiers rush to the source of Sally's signal, they find only the dead body of Oscar Borell. Sally, meanwhile, has taken a train to Liverpool, where she boards the S.S. Carina , a ship bound for Canada. Sally, who is known as the "Yellow Canary" because of her pro-Nazi sympathies, is snubbed by most of the ship's passengers except for Jan Orlock, a Polish refugee, and Lt. Commander Jim Garrick of British Naval Intelligence, who is traveling undercover as a supply officer for the British army. Sally welcomes Orlock's company but snubs Garrick. As the ship heads out to sea, it is followed by a German cruiser, which orders her to heave to. After the Germans commandeer the Carina , an officer boards the ship and demands that Garrick be turned over to the Germans. Orlock, who has seen his mother disabled and his home destroyed in a German raid, denounces the officer in perfect German. Sally watches as the Germans escort Garrick from the ship, but later discovers that the man taken prisoner was actually Garrick's double and the real Garrick is still onboard the Carina . After the Germans leave, Orlock tries to convince Sally of the heinousness of the Nazis and insists that she meet his mother, who is living in Halifax. When the ship docks at Halifax harbor, Sally takes a room at the Barrington Hotel, and the Royal Canadian Mounted Police assigns two agents to follow her. Orlock takes Sally to visit his invalid mother at the Chateau Brochet, and while Sally toasts the "new order," Madame Orlock drinks to old freedoms. Although Sally tells Orlock that they should stop seeing each other because of their differing political beliefs, he insists on calling for her the next afternoon. When Sally returns to her hotel room that night, she finds Garrick camped in a bed outside her door, claiming that it is the last available bed in Halifax. The next day, Sally joins Orlock and his mother on Signal Hill above the Halifax harbor. There, Orlock describes Halifax as Europe's gateway to the Atlantic and recounts the destruction of the harbor by a TNT explosion in 1917. When Sally and the Orlocks return to Chateau Brochet, they are visited by two Canadian agents, who warn the Orlocks that Sally is a traitor. Shaken by her accusers, Sally decides that she must leave Halifax. In reply, Orlock shows her his cigarette case which is encrusted with a swastika, and reveals that he is a Nazi undercover agent. After reaffirming his love for Sally, Orlock invites her to join his organization of Nazi spies, who he says will act "when the star rises," the phrase he spoke to the German officer aboard the Carina . After Sally returns to her hotel, the Orlocks are visited by Mrs. Towcester, a busy-body passenger from the Carina , who informs them that Garrick is a British Intelligence agent. As soon as Mrs. Towcester leaves, Orlock burns all his papers to insure that they will not fall into Garrick's hands. Later that night, Sally returns to the Chateau Brochet to search Orlock's study and is interrupted by Garrick, who is working undercover with Sally for British Intelligence. Back at the hotel bar, Sally informs Garrick that Orlock is a Nazi and that his organization plans to act shortly. At the door to her hotel room, Sally apologizes to Garrick for her rude behavior, and as she opens the door, he kisses her. Their embrace is witnessed by Orlock, who is seated in Sally's room. When the door closes, Orlock pulls out his gun and orders Sally to leave with him. In response, Sally slaps Orlock and accuses him of being a British agent who has betrayed their love. Sally's behavior regains Orlock's confidence, and he decides to introduce her to their leader. As Sally walks into the hotel corridor, she drops a message to Garrick, instructing him to go to headquarters and wait. On the drive to their meeting, Orlock tells Sally about how a man named Oscar Borell sabotaged their mission to bomb the King and Queen of England at their country palace by signaling the planes to drop the bombs on Buckingham Palace instead. Upon arriving at Chateau Brochet, Orlock introduces Sally to the other members of the ring, and she recognizes several of them as hotel employees. Then striding down the stairs, comes the group's leader, Madame Orlock. After informing Sally that she was only posing as Orlock's Mother, she tells the group that a German ship, loaded with TNT, has infiltrated a British convoy and will blow up Halifax harbor that night. She then announces that they plan to use Sally as a decoy and instructs her to call British Intelligence with the misinformation that the Queen Mary is the target of Nazi sabotage. As instructed, Sally phones Garrick at headquarters, but then smashes the lights and yells a warning about the planned sabotage of the harbor. Quickly switching on the lights, Orlock shoots Sally, who falls to the ground. Aware of Sally's danger, Garrick rushes to the chateau and takes the Nazis prisoners. Alerted by Sally's information, the British Navy singles out the German ship before it enters the harbor and bombs it into oblivion. Some time later in London, Sally, who was saved from the bullet's impact by Orlock's cigarette case, arrives home and is at last welcomed as a hero by her family. Sally then discovers that she was trailed by Garrick, who introduces himself to the Maitland family as their new son-in-law.