In 1954, two U.S. Marshals – Edward “Teddy” Daniels and his new partner, Chuck Aule – travel to the Ashecliffe Hospital for the criminally insane on Shutter Island located in Boston Harbor. They are investigating the disappearance of patient Rachel Solando, who was incarcerated for drowning her three children. Their only clue is a cryptic note found hidden in Solando’s room: “The law of 4; who is 67?” They arrive just before a storm hits, preventing their return to the mainland for a few days.
Daniels and Aule find the staff confrontational; Dr. John Cawley, the lead psychiatrist, refuses to turn over records, and they learn that Solando’s doctor, Dr. Lester Sheehan, left the island on vacation immediately after Solando disappeared. Though they are given access to the hospital, they are told Ward C is off limits, while the lighthouse has already been searched. While being interviewed, one patient secretly writes the word “RUN” in Daniels’ notepad. Daniels starts to have migraine headaches from the hospital’s atmosphere and experiences waking visions of his involvement in the Dachau liberation reprisals. He has disturbing dreams of his wife, Dolores Chanal, who was killed in a fire set by Andrew Laeddis, a local arsonist. In one instance Chanal tells Daniels that Solando is still on the island somewhere. The same applies to Laeddis who everyone claims was never there to begin with. Daniels later explains to Aule that locating Laeddis was an ulterior personal motive for taking the case.
During their investigation Daniels and Aule find that Solando has abruptly resurfaced with no explanation as to her former whereabouts or how she escaped. This prompts Daniels to break into the restricted Ward C. There he encounters George Noyce who is a patient in solitary confinement. Noyce warns Daniels that the doctors are performing questionable experiments on the patients, some of whom are taken to the lighthouse to be lobotomized. Noyce warns Daniels that everyone else on the island, including Aule, is playing an elaborate game specifically designed for Daniels. Daniels regroups with Aule and is determined to investigate the lighthouse. While climbing the cliffs toward it they become separated, and Daniels later sees what he believes to be Aule’s body on the rocks below. By the time he climbs down the body has disappeared, but he finds a cave where he discovers a woman in hiding who claims to be the real Rachel Solando. She states that she is a former psychiatrist at the hospital who discovered the experiments with psychotropic medication and trans-orbital lobotomy in an attempt to develop mind control techniques. Before she could report her findings to the authorities, however, she was forcibly committed to Ashecliffe as a patient. Daniels returns to the hospital, but finds no evidence of Aule ever being there.