‘Ek Thi Daayan’ is an entertaining romantic thriller with an electrifying jolt at the end. It revolves around Bobo, who is India's leading magician.. But unknown to even his beautiful girlfriend Tamara (Huma Qureshi), his life is falling apart. Hallucinations about his dead little sister Misha are casting a dark shadow on his life, threatening his very sanity. He is shown to be frequently drawn to his old vacant family apartment, where in the latest visit, he opens the lid of a treasure chest in one of the rooms, only to see a vision of his little sister Misha dead inside with a lizard crawling over the body. Tamara tracks him down to the apartment at the same time, taking him back to the room and opening the chest, only to find Misha's old doll inside. This latest hallucination proves to be too much, and Bobo is left with no option but to seek psychiatric help in the form of the rather odd Dr. Palit, who puts him under regression hypnosis to go back to the distant past, when Bobo was 11 and Misha 6.
A terrifying childhood story surfaces in which a dark supernatural power, in the form of a Daayan (witch) enters the lives of the two children and their father. Bobo and Misha are shown to live with their Dad in the family apartment with their mother having died some time earlier. Bobo is seen reading a book of Witchcraft from which he discovers the number 666 and uses it to travel on the apartment elevator to some unlisted floor at the bottom of the building, which he confides to Misha as being the entry to hell. According to Bobo, each building has its own hell, where the "bad people" of the building are consigned for eternity once they are dead. Soon after Bobo and Misha's trip on the elevator, a woman named Diana (Konkona Sen Sharma) moves into the building. Bobo is convinced that she is a witch and that she has surfaced from down under following his and Misha's trip on the elevator.
Diana immediately charms Bobo's single father and agrees to babysit the kids. She soon becomes a part of the family by marrying Bobo's father, although the paranoid Bobo still believes she's a witch. Meanwhile, Bobo learns from the book that the source of a Daayan's power is her plait, while that of a Pishacha is his neck. On Diana's birthday during the night of the red moon she convinces the kids to a game of hide and seek in an attempt to sacrifice Misha in order to restore her dark powers. As she begins to look for the kids, Bobo peeks through his hideout to see what she's doing. Bobo's father returns claiming to have forgotten his files and goes to look for them while Bobo goes to check on his sister. Finding the door locked Bobo begins to panic which brings his father to the door. Bobo's father knocks down the door only to find Misha lifeless in the trunk and a now undisguised Diana hovering over her body. Enraged, Bobo's father attempts to choke Diana but in vain as the now rejuvenated Diana kills him with her ear-piercing screams. Diana moves to the window to perform the rest of her ritual. But the distraught Bobo finds his father's dagger and cuts off Diana's plait, destroying her source of power. A shocked Diana begins to crumble into dust but not before she reveals that everything she did, she did for him and promises to return for Bobo.
Dr. Palit (Rajatava Dutta) dismisses Bobo's visions as just fantasy and convinces Bobo to do the same. After a brief outburst at the restaurant Bobo is knocked unconscious and taken to the hospital, where Tamara learns about his hallucinations. He then asks Tamara to marry him and they adopt the ten-year-old Zubin.
Everything goes well till the irresistible Lisa Dutt (Kalki Koechlin) enters their life during a magic show. Bobo suspects that the Daayan is back, but nobody believes him. In fact everybody loves Lisa. She even buys his old house, adding to his suspicion. Even Bobo starts thinking that it is all his imagination and that he is losing his mind.
But his suspicion turns to belief when during Lisa's house warming party, Tamara falls off the balcony. A critical Tamara is taken to the hospital. A few days later Lisa comes to visit Tamara. As she tries to unhook Tamara's IV bag, Bobo walks in and questions her in a fury. She claims that all she was trying to do is unhook the IV bag as it's empty. But the now aggressive Bobo tells her to get out. Afraid for his family, he calls Dr. Palit and who agrees to help investigate further.
Dr. Palit finds a very disturbing truth and calls Bobo telling him that he was right all along. But in the meantime, the Daayan appears as Diana in Dr. Palit's clinic and kills him. As Bobo reaches Dr. Palit's clinic he finds Dr. Palit dead and sees the eerie lizard lurking about. He finds a paper clutched in Dr. Palit's hand, on which Zubin's name is scribbled. He rushes to the exhibition where Zubin is supposed to be, only to find him missing. He then rushes back to his old home too look for Zubin but finds it empty as well. So he jumps into the elevator and descends into hell.
There, he finds Zubin lying on a sacrificial altar and the Daayan ready to sacrifice his son's life to sustain her powers. Bobo tries to save Zubin, when he encounters Tamara. To his surprise, Tamara is the Daayan, not Lisa. Then, Diana appears and tells him that he himself is a Pishacha. Tamara explains further by saying that no one could merely push buttons in an elevator and find hell. The fact that he is present with them, is the evidence of him being a Pishacha. He tries to fight her, but she is enraged and tells Bobo that it took her 20 years to be reborn and she won't let him kill her again. She knocks Bobo unconscious.
When he regains consciousness, he recalls the book about black magic and realizes that a Pishacha, good or bad can regain his strength as it is the night of the red moon. With his acquired powers, he fights Tamara and supposedly kills her. Soon after that, he returns his powers back to Satan. As he picks up Zubin, the Daayan now appearing as Diana reveals that only the pure and innocent can kill a Daayan and since Bobo killed her once before as a kid he is no longer innocent. Angry that Bobo denied Satan's gift Diana attacks him with her hair since it is the origin of her strength. Diana wraps her hair tightly around Bobo's neck to destroy his life force. Powerless, he tries to fight with her only to be flung around. Bobo grabs on to a pillar and an amused Diana once again immobilizes him with her high-pitched screeches but Bobo kicks the sacrificial dagger to the now conscious Zubin, and Bobo twists Diana and wraps her own hair on her mouth to stop the sound reaching Zubin's ears. Zubin eventually cuts off Diana's plait, but the crumbling Diana once again promises that she will come back.
In the end Zubin asks him whether everything that happened was magic or witchcraft. Bobo tells him that everyone has a little of both good and bad, but they themselves have to choose which side they're on. Bobo meets Lisa at the cafe and she asks him why he was so aggressive towards her initially. The screen fades to black as Bobo says, "I thought you were a Daayan".