‘Raanjhana’ is about a small-town boy needs to break through the class divide to gain acceptance from his childhood sweetheart who is in love with big city ideals. It is a love story that has a Shakespearean touch and is mounted on a lavish scale. Set in Benaras, in a sense, the heart of India, the first half in the vibrant city where the Ganges flows, just sweeps you off your feet with its colour and feel. Kundan Shankar (Dhanush) is the only son of a Tamil Hindu parents settled in Varanasi. Since his childhood, Kundan has had a strong and obsessive one-sided love for Zoya Haider (Sonam Kapoor), a Muslim girl residing in the same neighborhood. He always attempts to be around her but gets slapped several times in the process. Zoya finally changes her mind because of Kundan's consistency of affection. Her family is orthodox, preventing the lovers from being together. After Zoya moves to Aligarh for further studies, Kundan harmonizes with Zoya's family, assisting them with chores. Zoya gets into Jawaharlal Nehru University and discovers a long-lost strength as she confronts and then falls for student leader Akram Zaidi (Abhay Deol).
After eight years, Zoya returns to Varanasi, barely recognizing Kundan when she meets him again. Kundan again attempts to ask Zoya for her love but she is reluctant, revealing that she is in love with Akram. She urges Kundan to convince her family about her marriage with Akram. Kundan eventually agrees and gets their wedding arranged, promising Zoya that he will also marry someone else and forget her. He proposes to his childhood friend Bindiya (Swara Bhaskar), who has had a crush on him since childhood.
On the day of Zoya's marriage, Kundan finds out that Akram is a Sikh, whose actual name is Jasjeet Singh Shergill. This enrages him, as Zoya had used their religious differences to convince him that their match was not possible. He crashes the wedding ceremony and reveals the truth to Zoya's parents. Kundan is later informed that Zoya tried to commit suicide, and Jasjeet was mercilessly beaten by Zoya's relatives. At the hospital, Jasjeet tells Kundan that Zoya convinced him to portray himself as Muslim to marry her, a plan he should not have agreed to. While with Jasjeet, Kundan forgets about his own marriage ceremony with Bindiya, taking place that day, and is too late when he returns. Hurt and angry, Kundan's family disowns him. Jasjeet's parents take him back to his village. Kundan tries to redeem himself by taking Zoya to Jasjeet's village. There, he is devastated to find that Jasjeet has succumbed to his injuries, finally understanding that his one-sided love has resulted in an innocent man's death.
Kundan becomes a homeless vagrant and begins visiting various religious places and volunteering in their activities so that he can atone for his sins. During one such visit, a man advises him to do the right thing rather than run away from his sins. Motivated, Kundan locates Zoya to her university, where she is spearheading the political party "All India Citizen Party" (AICP), that had been created by Jasjeet. Kundan joins the nearby canteen and serves the party, while trying to get Zoya's attention. Over time, he becomes popular with the party due to his simple nature. They're also impressed when Kundan helps them in negotiating some tough situations by using his simplistic witty tricks. However, Zoya holds a grudge that the person who is responsible for Jasjeet's death is now taking his place. She tries to instigate party members against Kundan but Jasjeet's sister Rashmi (Shilpi Marwaha) tells Kundan to continue, as he is the best choice for fulfilling Jasjeet's vision.
Kundan, however, only wants Zoya to forgive him. The Chief Minister tells Zoya that she must get revenge on Kundan. To get back Jasjeet's position, she tells Zoya to let Kundan get injured as he delivers his campaign speech. Zoya apparently seems to get brainwashed by this plan and as the Chief Minister desired, Kundan is hurt badly and sent to ICU, thus fulfilling Zoya's revenge.
At a press meet, the Chief Minister denies having any hand in the blast that hurt Kundan. However, Zoya steps forward and reveals that the plan was plotted by her and the Chief Minister and that she is prepared to go to prison for this. Zoya then finds out that Kundan was aware of the plot and still let himself be injured. Shocked, she rushes to the hospital to be with him.
In a final voiceover, a dying Kundan wonders about letting go. He says he might have the desire to live again if Zoya called out to him, but then again, everything has become so tiring, he would rather let go and rest (euphemism for dying). He says that he can be born again and again in the same Varanasi, fall in love with a girl like Zoya again, and become a Raanjhanaa in her love. Then he slowly dies.