In 1799, Ichabod Crane, a New York City police constable criticized for his predilection for scientific methods, is dispatched to the upstate Dutch hamlet of Sleepy Hollow, which has been plagued by a series of brutal decapitations: a wealthy father and his son, Peter and Dirk Van Garrett, and a widow, Emily Winship. 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 Revolutionary War who rides at nightfall on a black steed in search of his missing head.
Ichabod, however, is skeptical of the paranormal due to his family’s past. Boarding at the home of Baltus Van Tassel and his second wife, Lady Van Tassel, he is taken with Baltus’ spiritual daughter, Katrina, from his first marriage. When a fourth victim, Jonathan Masbath, a servant in the Van Garrett household, 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. The Horseman decapitates Philipse next. Ichabod, Young Masbath, and Katrina venture into the Western Woods to look for the Horseman’s grave. They find a witch living in a cave, who reveals that the Horseman’s body lies under the “Tree of the Dead.” Ichabod digs up the grave and discovers the skull has been taken, deducing it was stolen by someone who now commands the ghostly revenant, who comes into the world of the living through the tree and who will continue to take others’ heads until his own is restored to him.
That night, the Horseman kills village midwife Beth Killian and her family and Katrina’s suitor Brom Van Brunt when he attempts to intervene; Ichabod is wounded by the Horseman but survives. Ichabod hypothesizes the Horseman’s targets are linked by a conspiracy. Notary Hardenbrook reveals that the first victim, Peter Van Garrett, had secretly married the widow Winship, writing a new will that left his estate to her and her unborn child. Ichabod deduces that all the victims (except Brom) were 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, Van Garrett’s closest relative.
Upon discovering the accusation, Katrina angrily burns the evidence. Hardenbrook commits suicide, and Reverend Steenwyck convokes a town meeting at the church to discredit Ichabod, but Baltus bursts in, announcing that the Horseman has killed Lady Van Tassel. The Horseman attacks the church but is unable to enter. In the chaos, the remaining elders turn on each other; Steenwyck kills Lancaster and is in turn killed by Baltus, who is harpooned and decapitated by the Horseman.
Initially concluding that Katrina controls the Horseman, Ichabod discovers that the sigil she had drawn underneath his bed and in the church, which he believed summoned the Horseman, was one of protection. He finds that a wound on “Lady Van Tassel’s” decapitated body was caused post-mortem. Van Tassel, alive and well, reveals herself as the master of the Horseman. She faked her death and killed Van Tassel’s servant girl, Sarah, to plant her body as hers. She takes Katrina to the windmill, where she explains her true heritage. She and her twin sister were members of the impoverished Archer family who were evicted years ago by Peter Van Garrett when he favored Baltus and his family instead.
She swore revenge against Van Garrett and all who had wronged her family, pledging herself to Satan if he would raise the Horseman to avenge her by killing them, which would allow her to claim the Van Garrett and Van Tassel estates uncontested. Manipulating her way into the Van Tassel household, she used fear, blackmail, and lust to manipulate the other elders into her plot. Having eliminated all other heirs and witnesses, as well as her sister – the crone of the woods– for aiding Ichabod, she summons the Horseman to kill Katrina, the last person remaining in the way of her plans.
Ichabod and Masbath rush to the windmill as the Horseman arrives. After an escape that destroys the windmill and a subsequent chase to the Tree of the Dead, Ichabod retrieves the Horseman’s skull from Van Tassel and returns it to him, breaking the curse and setting the Horseman free from Van Tassel’s control. With his head restored, the Horseman spares Katrina and instead abducts Van Tassel, giving her a bloody kiss and returning to Hell via the Tree of the Dead with her in tow, fulfilling her end of the ‘deal’. With the case solved, Ichabod returns to New York City with Katrina and Young Masbath, just in time for the new century.