The film begins in 1857, when India was ruled by the British East India Company. Mangal Pandey is a sepoy, a soldier of Indian origin, in the army of the East India Company. Pandey is fighting in the Anglo-Afghan Wars and saves the life of his British commanding officer, William Gordon. Gordon is indebted to Pandey and a strong friendship develops between them, transcending both rank and race.

Events in India's history — from the Emergency and the famous Cricket World Cup win to the Punjab riots — unfold from the perspective of an innocent Sikh man Laal Singh Chaddha, a person with a low IQ but high optimism. Laal is able to achieve everything under the sun but his childhood love continues to elude him.