Monk and Natalie go to police headquarters to ask Captain Stottlemeyer for a raise. While they are there, Lieutenant Disher brings in Warren Landis, a security guard from a local museum, for questioning. The world-famous Alexander diamond has been stolen from the museum, and the police are interrogating all museum employees. When Monk notices some chemical residue on Landis' fingers, Lieutenant Disher arrests the security guard on drug charges.
When Natalie hears that there's a million dollar reward for the diamond, she convinces Monk to use his detective skills to try to find the stolen gem. Monk goes to the museum to investigate, where he encounters three other detectives who are also after the reward: a retired Scotland Yard detective named Inspector St. Clare, a young detective with lots of techno-gadgets named Rufus, and a muscle-bound bounty hunter named Dirk.
While Monk searches the crime scene, the other detectives hang back and follow his lead. Monk deduces that the heist was an inside job, and clues indicate that the perpetrator could have been a practitioner of transcendental meditation. Monk and Natalie head to a meditation retreat, where they find their man: Danny Chasen. Unfortunately, Chasen has been murdered, and the diamond is nowhere to be found.
Monk is convinced that Chasen must have been working with someone else, an employee of the museum. Monk heads back to police headquarters to confer with Captain Stottlemeyer. While there, Monk notices a woman named Jennie Mandeville. Disher explains that Mandeville has been coming into the police station to confess to nonexistent crimes. Later, Dr. Kroger informs Monk that Jennie Mandeville is the name of the woman who established the meditation retreat where Danny Chasen was killed, and with this bit of information, Monk solves the case!
Monk races from Dr. Kroger's office to police headquarters with the three detectives following him the whole way. When he gets to the station he explains what happened. The woman calling herself "Jennie Mandeville" was in on the robbery. She took the name from a plaque at the meditation retreat where she had gone to kill Danny Chasen, one of her fellow robbers. Warren Landis, the museum security guard that Lieutenant Disher arrested for drugs, was also one of the jewel thieves, as well as the boyfriend of the so-called "Jennie Mandeville." Landis was the inside man, and he had the diamond on him during the post-robbery questioning that led to his drug arrest. Knowing he would soon be searched, Landis used a wad of gum to stick the diamond under the table in the interrogation room where he was being questioned. Later, after his arrest, he called his girlfriend from jail and told her where he hid the diamond. She took on the fake name of "Jennie Mandeville," and began confessing to fake crimes, trying to gain access to the interrogation room where the diamond was hidden. Unfortunately for her, she never did manage to get herself into the right room.
With the case solved, everyone turns their attention to the interrogation room where the diamond remains, and all they can do is watch as a cleaning lady finds the priceless gem. The cleaning lady gets the big reward, but Monk gets a reward of his own when Stottlemeyer informs him that the police department has agreed to put him on retainer. It's good news for Monk, the people of San Francisco, and all those who appreciate Monk's unique approach to solving crime.