An unnamed narrator is discussing some of Dupin's most celebrated cases with the famous Parisian amateur detective C. Auguste Dupin, when they are joined by the Prefect of the Police, a man known as G—. The Prefect has a case he would like to discuss with M. Dupin.
A letter, the contents of which - if revealed - would be highly compromising, has been stolen from the private sitting room of the Queen by the unscrupulous Minister D—. He was in the Queen’s room, saw the letter, and switched it for a letter of no importance. He has been blackmailing the Queen.
The Prefect makes two deductions with which Dupin does not disagree:
The Prefect says that he and his police detectives have searched the Ministerial hotel where D— stays and have found nothing. They checked behind the wallpaper and under the carpets. His men have examined the tables and chairs with microscopes and then probed the cushions with needles but have found no sign of interference; the letter is not hidden in these places.
Dupin asks the Prefect if he knows what he is looking for and the Prefect reads off a minute description of the letter, which Dupin memorizes. The Prefect then bids them good day.
A month later, the Prefect returns, still bewildered in his search for the missing letter. He is motivated to continue his fruitless search by the promise of a large reward, recently doubled, upon the letter’s safe return. He will pay 50,000 francs to anyone who can help him. Dupin asks him to write that check now and he will give him the letter. The Prefect is astonished but knows that Dupin is not joking. He writes the check and Dupin produces the letter. The Prefect determines that it is genuine and races off to deliver it to the Queen.
Alone together, the narrator asks Dupin how he found the letter. Dupin explains the Paris police are competent within their limitations, but have underestimated who they are dealing with. The Prefect mistakes the Minister D— for a fool because he is a poet. For example, Dupin explains how an eight-year old boy made a small fortune from his friends at a game called "Odds and Evens." The boy was able to determine the intelligence of his opponents and play upon that to interpret their next move.
D— knew the police detectives would have assumed that the blackmailer would have concealed the letter in an elaborate hiding place. D— hid the letter in plain sight.
Dupin visited the minister at his hotel. Complaining of weak eyes Dupin is wearing a pair of green spectacles, the true purpose of which is to disguise his eyes as he searches for the letter. In a cheap card rack hanging from a dirty ribbon, he sees a half-torn letter and recognizes it as the letter of the story's title. Striking up a conversation with D— about a subject in which the minister is interested, Dupin examines the letter more closely. It does not resemble the letter the Prefect described so minutely; the writing is different and it is sealed not with the "ducal arms" of the S— family, but with D’s monogram. Dupin notices that the paper is chafed as if the stiff paper was first rolled one way and then another. Dupin concludes that D— wrote a new address on the reverse of the stolen one, re-folded it the opposite way and sealed it with his own seal.
Dupin leaves a snuff box behind as an excuse to return the next day. Striking up the same conversation they had begun the previous day, D— is startled by a gunshot in the street. While he goes to investigate, Dupin switches D—'s letter for a duplicate.
Dupin explains that he left a duplicate to ensure his ability to leave the hotel without D— suspecting his actions. As a political supporter of the Queen and old enemy of the Minister, Dupin also hopes that D— will try to use the power he no longer has, to his political downfall, and at the end be presented with an insulting note that implies Dupin was the thief: Un dessein si funeste, S'il n'est digne d'Atrée, est digne de Thyeste (If such a sinister design isn't worthy of Atreus, it is worthy of Thyestes).
Dupin is not a professional detective. In "The Murders in the Rue Morgue," Dupin takes up the case for amusement and refuses a financial reward. In "The Purloined Letter," however, Dupin undertakes the case for financial gain. He is not motivated by pursuing truth, emphasized by the lack of information about the contents of the purloined letter. Dupin's innovative method to solve the mystery is by trying to identify with the criminal. The Minister and Dupin have equally matched minds, combining skills of mathematician and poet, and their battle of wits is threatened to end in stalemate. Dupin wins because of his moral strength: the Minister is "unprincipled," a blackmailer who obtains power by exploiting the weakness of others.
Poe may have identified with both Dupin and D—. Like Poe, these two characters command both the power of analysis and a strong imagination.
"The Purloined Letter" completes Dupin's tour of different settings. In "The Murders in the Rue Morgue" he travels through city streets; in "The Mystery of Marie Roget" he is in the wide outdoors; in "The Purloined Letter" he is in an enclosed private space.
French linguist Jean-Claude Milner offered in Détections fictives , Le Seuil, collection « Fictions & Cie », 1985 supporting evidence that Dupin and D- are brothers, based on the final reference to Atreus and his twin brother, Thyestes.
The story was used by the French psychoanalyst Jacques Lacan and the philosopher Jacques Derrida to present opposing structuralist interpretations. The two exchanged a series of letters concerning the nature of desire.