In 1799, New York City police constable Ichabod Crane is dispatched to the upstate Dutch hamlet of Sleepy Hollow, which has been plagued by a series of brutal decapitations: a wealthy father and son, and a widow. Received by the insular town elders—wealthy businessman Baltus Van Tassel; town doctor Thomas Lancaster; the Reverend Steenwyck; notary James Hardenbrook; and magistrate Samuel Philipse—Ichabod learns that locals believe the killer is the undead apparition of a headless Hessian mercenary from the American Revolutionary War who rides a black steed in search of his missing head.
Ichabod begins his investigation, skeptical of the paranormal story. Boarding at the home of Baltus Van Tassel and his wife, Lady Van Tassel, he is taken with Baltus' spiritual daughter, Katrina. When a fourth victim is killed, Ichabod takes the victim's son, Young Masbath, under his wing. Ichabod and Masbath exhume the victims on a tip from Philipse, learning that the widow died pregnant; Ichabod witnesses the Horseman killing Philipse shortly after. He, Young Masbath and Katrina, venture into the Western Woods, where a crone living in a cave reveals the location of the Horseman's grave at the "Tree of the Dead." He digs up the Horseman's grave and discovers the skull has been taken, deducing that it has been stolen by someone who now controls him and that the tree is his portal into the living world.
The Horseman then kills the village midwife and her family, as well as Katrina's suitor Brom when he attempts to intervene; Ichabod hypothesizes that the Horseman is attacking select targets linked by a conspiracy. He and Masbath visit Hardenbrook, who reveals that the first victim, Peter Van Garrett, had secretly married the widow, writing a new will that left his estate to her. Ichabod deduces that all the victims (except Brom) are either beneficiaries or witnesses to this new will, and that the Horseman's master is the person who would have otherwise inherited the estate: Baltus, a Van Garrett relative.
Katrina, upon discovering the accusation, burns the evidence. Hardenbrook commits suicide, and Steenwyck convenes a town meeting to discredit Ichabod, but Baltus bursts into the assembly at the church, announcing that the Horseman has killed his wife. The Horseman attacks the church, but is unable to enter. In the chaos, the remaining elders turn on and attack each other: Steenwyck and Lancaster are killed, and the Horseman harpoons Baltus through a window, dragging him out of the church and acquiring his head.
Initially concluding that Katrina controls the Horseman, Ichabod discovers that her diagram, which he believed summoned the Horseman, is really one of protection, and additionally finds a post-mortem wound on "Lady Van Tassel's" body. Lady Van Tassel, alive and well, then reveals herself to Katrina, and explains her true heritage from an impoverished family evicted years ago by Van Garrett when he favored Baltus and Katrina instead. She swore revenge against Van Garrett and all who had wronged her, pledging herself to Satan if he would raise the Horseman to avenge her, and also to claim the estate uncontested. Manipulating her way into the Van Tassel household, she used fear, blackmail, and lust to draw the other elders into her plot. Having eliminated all other heirs and witnesses — and having killed her sister, the crone, for aiding Ichabod — she summons the Horseman to finish Katrina.
Ichabod and Masbath rush to the windmill as the Horseman arrives. After an escape that destroys the windmill and the subsequent chase to the Tree of the Dead, Ichabod throws the Horseman's skull to him. Freed, and with his head restored, the Horseman spares Katrina and attacks Lady Van Tassel, giving her a bloody kiss and returning to Hell with her in tow, fulfilling the deal. His faith restored, Ichabod returns to New York with Katrina and Young Masbath, just in time for the new century.
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