Billu (Irfan Khan) is a poor barber who lives with his his wife Bindiya (Lara Dutta) and their two children, Gunja (Mitali Mayakar) and Ronak (Pratik Dalvi) in the village of Budbuda. He also spends time with his close friends, Budbudiya (Rajpal Yadav)and Naubat Chacha (Asrani). Though struggling, Billu lives an uneventful life until Bollywood superstar Sahir Khan (Shahrukh Khan) comes to the village for a film shoot.

Billu has mentioned to his family that he knows Sahir from the past but has never elaborated how he knows the star. Thus his children spread rumors about their father's friendship with the famous star which spread throughout the village. Virtually overnight, Billu who had previously been scorned by most due to his impoverished state, becomes the center of attention. People who had spurned him only the week before now call him a close friend so that he will introduce them to Sahir. Billu refuses and downplays the friendship, saying that it is impossible for him to introduce people in the village to Sahir. The powerful businessman, Sahukaar Daamchand (Om Puri) demands to see Sahir and offers Billu expensive gifts in order to gain such a meeting. When Billu consistently fails to introduce the people of the village to Sahir, his situation changes once again. He is accused of lying about his friendship and everyone - including his wife and children, begin to doubt his character and integrity. Rather than defend himself, Billu remains quiet about the nature of their friendship.

On his last day in the village, Sahir speaks at a local school. He tells the children about his own impoverished childhood when he had nothing but a very special friendship with a young boy named Billu. It was Billu who took care of Sahir and who eventually helped him travel to Mumbai where he became a famous star. Billu, who is standing at the back of the event, leaves during the talk without revealing to Sahir that he is there. The townspeople, realizing their error however, take Sahir to Billu's house where the two childhood friends are finally reunited.