‘Kyaa Kool Hain Hum 3’ is the first sex comedy of Bollywood. Kanhaiya (Tusshar Kapoor), who after being kicked out by his father,  along with his jobless friend Rocky (Aftab Shivdasani) goes to Thailand, where Mickey (Krishna Abhishek) offers them to work in porn films. Desperate to earn money they both accept the job and kick-start their porn star career by working in adult versions of Bollywood movie such as Chennai Sexpress (Chennai Express), Kholay (Sholay), Lick (Kick) etc., along with other porn stars like Shakuntala (Claudia Ciesla) and Meri Lee (Gizele Thakral).

With a twist of fate, Kanhaiya falls in love with a beautiful Indian girl Shalu (Mandana Karimi ), who is unaware of Kanhaiya's profession. As Kanhaiya proposes Shalu, she calls her father Surya Karjatiya (Darshan Jariwala) to meet his family. Unable to get any other solution, Kanhaiya decides to arrange a fake family out of a team of porn stars. But it soon becomes a comedy of errors as both Rocky and Mickey arrive disguised as Kanhaiya's father. Things get funnier when Kanhaiya's real father PK Lele (Shakti Kapoor) also arrives along with his stepmother (Meghna Naidu).

Kanhaiya and his team struggle to maintain the family drama, as they also secretly try to shoot their next adult movie. But soon everyone figures out the reality by seeing Kanhaiya and Rocky's porn movie collection at a local DVD store. Initially upset, Karjatiya calls off the wedding, to which Kanhaiya attempts to commit suicide, resulting in everyone falling in a sand pit. Mickey uses a Hot air balloon to save them. Later, Karjatiya forgives Kanhaiya and allows him to marry his daughter, while Mickey decides to direct family movies only.