It is 1840 in the Florida keys. Feisty Loxi Claiborne is running the family salvage business following the death of her father. Shortly after a hurricane blows through the area word comes that a ship has foundered on the reefs. Loxi and her salvage master Captain Phil head out on their ship, the Claiborne, to claim salvage rights, competeing with other ships.
The sinking ship is the Jubilee, and a rival salvager, Captain King Cutler, has already arrived. Cutler fires a salvo across the bow of Loxi's ship to warn her off. Suspecting a planned scuttling, Loxi agrees to save some of the crew, while denied part of the cargo salvage. Thus she meets Captain Jack Stuart, unconscious and lashed to the mast when his ship hit the rocks.
Loxi lives with her widowed mother and a visiting cousin from Havana called Drusilla. Also living in the house is a colored servant who helped raise Loxi. Drusilla happens to be involved with King Cutler's brother Dan, but must be secretive about it.
Bringing him home to recuperate, Loxi and Jack eventually fall in love. He tells her that his dream is to command a new steam ship, the Southern Cross. But Jack feels that an important man within the Deveraux company, which owns the ship, has it out for him, and will use the sinking of the Jubilee to deny him the Southern Cross. Jack plans to go to Charleston to plead his case; as it happens Loxi also plans a trip to Charleston with Drusilla to visit her aunt.
Loxi meets Steve Tolliver at a party in Charleston. Steve is the important man that Jack referred to. Finding that she is unable to talk to a very ill Commodore Deveraux, head of the shipping line, Loxi decides to "wrap that Steve Tolliver around my little finger," in order to secure command of the Southern Cross for Jack. Loxi flirts outrageously with Steve and at a dance everyone there assumes they are a couple. When she realizes this, Loxi stops the music and announces her real love is Jack, and that she intends to marry him. Later that night they plan to wed on board Jack's ship before he sails back to the Caribbean. But Steve interrupts the ceremony in time, throwing Loxi into the bay and jumping in after her, then ordering the ship to sail.
Leaving Charleston, Drusilla returns home to Havana and Loxi and Steve return to Key West. Steve has come to rid the Keys of pirates like Cutler. Cutler in turn arranges to have Steve shanghaied by the crew of the whaler Tyfib. Loxi hears of the plot and gets Jack to help her save Steve. Later they discover that Steve has Jack's appointment to the Southern Cross with him. Angry over a seemingly underhanded act, Jack meets with Cutler before sailing to Havana to take command of his new ship.
Rumors circulate and prices of the cargo of the Southern Cross go up and down wildly, leaving Steve to suspect a wreck is planned. He commandeers the Claiborne with Loxi on board and heads to Havana to stop Jack. Using an axe to part some lines, Loxi disables her ship and they sit becalmed in a fog bank as the Southern Cross piles into a reef and sinks. Unknown to Jack, Drusilla had stowed away to return to Dan Cutler and she is drowned.
Jack is put on trial for wrecking his ship and the testimony reveals a woman may have been on board, though none was rescued. To determine if a woman's body is in the wreck, Steve agrees to dive with Jack to the wreck, which sits on a shelf just below the surface, but on the edge of a deep trench. On the dive ship Captain Cutler instructs one of his men to sever Steve's air hose, but Captain Phil intervenes in time.
While down in the wreck Jack and Steve discover proof that Drusilla was on board and has been drowned -- her distinctively colored shawl is seen swaying in the undersea current in the hold of the Southern Cross.
Taking proof back with them that could hang Jack, they are attacked by a giant squid. Steve becomes ensnared in a tentacle of the squid, but Jack's basically good nature prompts him to attack the squid, which releases Steve. Up above a large wave surges toward the small fleet of ships supporting the dive. Loxi knows the sunken ship could be swept into the deep and urges that the two men be brought up. As the men up top race to bring up the divers one of the lines parts, and one of the divers is lost as the Southern Cross slips into deeper water.
When the rescued diver resurfaces, it turns out to be Steve. Captain Phil philosophizes that Jack "went down with his ship."
Loxi winds up with Steve in Charleston.