Billu (Irrfan Khan) is a poor barber who lives with his wife Bindiya (Lara Dutta) and their two children, Gunja (Mitali Mayekar) 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 (Shah Rukh 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. When his children talk about their father's friendship with the star, word spreads throughout the village. Virtually overnight, Billu, who had previously been scorned by most due to his lowly 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. Even so, 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 â€“ including his wife and children â€“ begin to doubt his character and integrity. Rather than defend himself, Billu remains quiet about the nature of his and Sahir's friendship.
On Sahir's last day in the village, the star speaks at a local school. He tells the children about his own impoverished childhood when he had nothing but a special bond of friendship with another young boy, named Billu. It was Billu who had taken care of Sahir and eventually helped him travel to Mumbai City by giving him his gold earring where Sahir became a star. Billu, who is standing at the back of the event, leaves during the talk without revealing to Sahir that he is there. However the townspeople realized their error, and take Sahir to Billu's house. Billu's children come home and apologise to their father. Then, Sahir appears in his car and is reunited with Billu. In the end, Sahir must leave for another shoot but promises that his and Billu's friendship is reignited and will remain friends.