A street-toughened orphan by the name of Munna is befriended by some kind folks, whose effervescent daughter Mili soon grows to be his best buddy. Both gravitate toward the Mumbai movie industry. While Mili finds occupation as a movie extra, Munna earns his livelihood selling movie tickets in the black market.
Mili has ambitions of becoming an actress. Fortune glances her way when she dances her way into a movie star's attention. This actor, Raj Kamal, arranges for her to be auditioned for the heroine's role in his upcoming film called Rangeela. Mili's shortcomings amount to distractions, but thanks in no small way to Munna and Raj, she lands the role.
Raj and Munna both fall for Mili, but Mili is too busy making the movie to notice any of this. She starts spending a lot of time with Raj during the filming. Munna tries many times to tell Mili that he loves her, but he is unable to, or Raj gets in the way. Eventually, feeling inferior, Munna decides to leave Mili to Raj, who can give her a better life than he can. The matter is not resolved though, as Mili learns of this on the film's opening night after reading the letter that Munna left for her. After learning that Munna is also leaving the town, she emotionally runs out of the function to find Munna. Raj is initially angry at Mili for leaving the function midway. Mili tells Raj that Munna has written in the letter that he loves her but has misunderstood their relationship and left the town for good. Raj is taken aback when Mili tearfully tells him that she too loves Munna and can't think of a life without him. Having realized his mistake, Raj decides to reunite Mili and Munna.
Mili and Raj manage to stop Munna midway. All the misunderstandings get cleared up. Finally, Mili and Munna reunite with a hug.