Sándor Korvin (Maximilian Schell), the conductor at the Budapest Opera House, is training his wife Elena (Jane Seymour) for the role of Marguerite in Faust. Her debut is met with mockery and a scathing review orchestrated by the vindictive Baron Hunyadi (Jeremy Kemp), whose advances she spurned. Elena is Driven to Suicide, and the grieving Sándor confronts the critic who wrote the review. He kills the man, but a fire is started in which Sándor's face is horribly disfigured. He retreats to the sewers beneath the opera house, where he becomes the masked Phantom of the Opera. Years later, a new production of Faust is being put on at the opera house. A young chorus girl named Maria Gianelli (also played by Seymour) catches the eye of Sándor, for she is the spitting image of his dead wife. He begins to tutor her, but is infuriated to learn that she is falling in love with the director of the opera, a man named Michael Hartnell (Michael York)
This film has examples of:
- Anonymous Benefactor: Sándor is this to Maria, giving her gowns and singing lessons while she is unaware of who he is.
- Creepy Crows: A flock of crows attacks Baron Hunyadi, resulting in his death.
- Crusading Widower: Sándor, who seeks to avenge his wife's death, punishing all those responsible for her downfall.
- Dramatic Unmask: Maria pulls Sándor's mask off when he has his guard down, and he reacts with rage, telling her that now that she has seen his face she can never leave him.
- Driven to Suicide: After her disastrous debut as Marguerite, Elena throws herself in the river.
- Eye Scream: Crows peck out the eyes of Baron Hunyadi.
- Facial Horror: Sándor's face is hideously disfigured by both fire and acid from a jar that topples over during his fight with the critic.
- Falling Chandelier of Doom: In the finale, the Phantom cuts the chain on the chandelier and it falls.
- Green-Eyed Monster: Sándor is angered when he learns of Michael and Maria's romantic relationship. He threatens Michael with death if he doesn't stay away from Maria.
- Identical Stranger: Maria, who looks exactly like Sándor's dead wife Elena (due to being played by the same actress), though there is apparently no familial connection between them.
- The Lost Lenore: Elena Korvin. She dies early on, and it's Sándor's desire to avenge her that drives the plot. He also becomes obsessed with another woman because she looks just like Elena.
- Love Makes You Evil: Sándor's love for his wife is what drives him to wreak vengeance on those who destroyed her.
- Mummies at the Dinner Table: It's revealed that Sándor has kept his wife's body with him in his underground lair for years.
- Murder the Hypotenuse: Sándor threatens to do this to any man who tries to date Maria.Sándor: It's over with Hartnell.Maria: Yes.Sándor: You'll never see him again?Maria: Of course not.Sándor: If you ever see him, Maria, he will die. If you see any other man, he will die.
- Replacement Goldfish: Sándor sees Maria as this due to her striking resemblance to Elena, though she does not return his feelings.
- Thoroughly Mistaken Identity: Sándor begins to believe Maria is Elena and refers to her as such. She angrily responds by saying she's not who he thinks she is, but he asks her if she is so sure of that. He plans to throw his wife's corpse (preserved by him for years) into the river, so when it is found it will be assumed it is Maria's. In Sándor's warped mind, Maria's old self will have then "died" and thus thereafter she will truly "be" Elena.
- You Have Failed Me: After finding out that his assistant failed to stop Maria from escaping, Sándor kills him.