Murli Prasad Sharma (Sanjay Dutt) aka Munna Bhai, a gangster who is in love with the voice of Janhavi (Vidya Balan), a radio jockey, devises a plan to meet her when she announces a quiz contest featuring the life and beliefs of Mahatma Gandhi, to be aired on 2 October, the birthday of Gandhi. To prepare for the contest, Circuit kidnaps and bribes a group of professors to provide the answers for Munna. After winning the contest, Munna is granted an interview with Janhavi wherein he presents himself as a professor of history and a Gandhi specialist. Janhavi subsequently asks Munna to present a lecture on Gandhi to a community of senior citizens who live in her home, called the Second Innings House. To prepare for this event, Munna engages in a period of intense study at a Gandhi institute. For three days and nights (and without food or sleep), Munna reads about the life and ideologies of Gandhi.
It is during this period that the image of Mahatma Gandhi (Dilip Prabhavalkar), addressed by his nickname "Bapu" ("father"), appears and offers help and advice to Munna. Gandhi encourages Munna to tell the truth about himself to Janhavi, but Munna resists this advice. With Gandhi's help, Munna succeeds in impressing Jahnavi and cultivates a new lifestyle based upon Gandhism. Munna starts to co-host a radio-show with Janhavi and Gandhi's image, guiding his audience to use Gandhigiri to solve everyday problems.
The film has several subplots. One of the most prominent of these details the story of Lucky Singh (Boman Irani) and his daughter Simran (Dia Mirza). Lucky is an unscrupulous businessman who employs Circuit and Munna Bhai to conduct underworld activities for him. His daughter, Simran, is engaged to marry Sunny (Abhishek Bachchan), the son of the powerful businessman Kkhurana (Kulbhushan Kharbanda). Kkhurana is superstitious and his activities are controlled by his astrologer, Batuk Maharaj (Saurabh Shukla), whose particular use of numerology led Kkhurana to add an extra "K" to his real name (Khurana) as well as to the conclusion that the "Second Innings House" would be the most auspicious place for Sunny and Simran to live. Maharaj also convinces Kkhurana to reject the marriage between Simran and Sunny when it is revealed that Simran is considered to be a manglik (an individual whose Vedic astrological makeup is believed by some to be devastating for marriage, mostly leading to the death of the spouse after a certain calculated period of marriage). Lucky appropriates the "Second Innings House" by sending Munna to Goa (keeping him out of the way) and then blackmailing him to let the matter pass or risk losing his love Janvi. In response, Munna launches a "non-violent" protest to reclaim the house. He calls this protest "Get Well Soon, Lucky" and asks his radio show's audience to send Lucky flowers (red roses especially) to help him recover from the "disease of dishonesty".
It is during this time that Munna decides to tell Janhavi the truth (via a letter he gives to her). Heartbroken, Janhavi leaves Munna. Munna receives another setback when he is tricked by Lucky into revealing his conversations with Gandhi before a public audience. At this conference, Munna finds that only after he has learned something about "Bapu"'s life can the Gandhi image talk about it, which serves as proof for a psychiatrist in the audience that Munna is delusional. Gandhi's monologue at the end of the film, however, questions this conclusion. Munna, despite these defeats, continues to use Gandhigiri, a decision which transforms Lucky, revives Janhavi's affection, and resolves Simran's marriage. Lucky Singh eventually becomes a student of "Gandhigiri" and is greeted by Gandhi's image not long after he has begun to study "Bapu"'s life. Immediately he calls for a photograph to be taken of them together; this perplexes the photographer, who cannot see the Gandhi image.