Set in 2006, the film opens in medias res in Mumbai with a policeman torturing Jamal Malik (Dev Patel), a former street child from the Juhu slums. In the opening scene, a title card is presented:

Jamal is a contestant on the Indian version of Who Wants to Be a Millionaire?, hosted by Prem Kumar (Anil Kapoor). He has already won Rs.10,000,000 and has made it to the final question, for Rs. 20,000,000, scheduled for the next day. Following up on a tip-off from Prem Kumar, the police now suspect Jamal of cheating, because the other possibilities—that he has a vast knowledge, or that he is very lucky—seem unlikely.

Jamal then explains that, while at least the question about Bollywood superstar Amitabh Bachchan was very simple, he knew the answers of most questions by chance, because of things that happened in his life, conveyed in a series of flashbacks documenting the details of his childhood. This includes scenes of his obtaining Bachchan's autograph (which is then sold by his brother without his permission), the death of his mother during anti-Muslim violence (rekindling memory of the 1993 anti-Muslim attacks in the Bombay slums),[7] and how he and his brother Salim befriended Latika (Rubina Ali). He refers to Salim and himself as Athos and Porthos, and Latika as the third of the The Three Musketeers, the name of whom they do not learn.

In Jamal's flashback, the children are eventually discovered by Maman (Ankur Vikal) while they are living in the trash heaps. Maman is a gangster (a fact they do not actually know at the time they meet him) who pretends to run an orphanage in order to "collect" street children so that he can ultimately train them to beg for money. Salim is groomed to become a part of Maman's operation and is told to bring Jamal to Maman in order to be blinded by acid, and have his eyes removed with a hot spoon (which would improve his income potential as a singing beggar). Salim protects his brother, and the three children try to escape, but only he and Jamal are able to do so, jumping onto a train which is departing. Latika catches up and takes Salim's hand, but Salim purposely lets go, and she is recaptured by the gangsters as the train accelerates away.

The brothers make a living, traveling on top of trains, selling goods, picking pockets, and cheating naive tourists at the Taj Mahal by pretending to be tour guides. Jamal eventually insists that they return to Mumbai since he wishes to locate Latika, which annoys Salim. They eventually find her, discovering that she had been raised by Maman to be a culturally talented prostitute whose virginity will fetch a high price. The brothers attempt to rescue her, but Maman intrudes, and in the resulting conflict Salim draws a gun and kills Maman. Salim then uses the fact that he killed Maman to obtain a job with Javed (Mahesh Manjrekar), a rival crime lord. Salim returns to the room where the three were staying and orders Jamal to leave. Jamal after hearing Salim calling Latika for sex, attacks his brother violently before being overturned by Salim and confronted by Salim's revolver with Salim threatening to kill him. Latika intervenes and tells Jamal to leave, breaking his heart and sacrificing herself to keep him safe. With Maman's men searching for Salim, Salim and Latika flee to an unknown location, leaving Jamal alone to fend for himself.

Years later, Jamal has a position as a "chai wallah" (tea server) at a call center. When he is asked to cover for a co-worker for a couple of minutes, he searches the database for Salim and Latika and succeeds in getting in touch with Salim, who has become a high-ranking lieutenant in Javed's organization. Jamal confronts a regretful Salim on tense terms. Jamal asks him where Latika is. Salim, annoyed and bewildered that his brother still cares about her, responds that she is "long gone." Salim invites Jamal to live with him, and after Jamal follows him to Javed's house, he sees Latika (Freida Pinto) there, and she also notices him. He bluffs his way in, pretending initially to be a cook and then later a dishwasher. Jamal and Latika have an emotional reunion, but elation quickly turns to despair after Jamal discovers that Latika is involved with Javed. Upon discovering this, Jamal tries to persuade Latika to leave. She rebuffs his advances and insists that he forget about her and leave, but instead Jamal confesses his love for her and promises to wait for her at Mumbai's largest train station, the VT station "five o' clock every day until you come". One day, while Jamal waits there, Latika attempts to rendezvous with him, but she is recaptured by Salim and Javed's men. One of the men slashes her cheek with a knife as Salim drives off, leaving a furious Jamal behind with a crowd of onlookers.

Jamal again loses contact with Latika when Javed moves to another house outside of Mumbai. In another attempt to find Latika, Jamal tries out for the popular game show Who Wants to Be a Millionaire, because he knows she'll be watching. He makes it to the final question, despite the hostile attitude of the host who feeds Jamal a wrong answer during a break. At the end of the first day of the show, Jamal has one question left to win 20 million rupees, but the host calls the police and Jamal is taken into police custody, where he is tortured as the police attempt to learn how he, a simple "slumdog", could know the answers to so many questions. While watching a tape of the show, question by question Jamal tells his whole story, explaining how his life experiences coincidentally enabled him to know the answer to each question. The police inspector (Irrfan Khan) calls Jamal's explanation "bizarrely plausible" and, realizing he is not in it for the money, allows him to return to the show for the final question.

At Javed's safehouse, Latika watches the news coverage of Jamal's miraculous run on the show. Salim gives Latika his phone and the keys to his car. He urges her to run away and to "forgive me for what I have done." Shortly after Latika has left, Salim fills the bathtub full of cash and sits in the tub, waiting for his death. The final question asked of Jamal is to name the third musketeer in the story of The Three Musketeers. When Jamal uses his last Phone-A-Friend lifeline to call Salim, Latika barely succeeds in answering the phone in time and they reconnect. She does not know the answer to the final question, but she tells Jamal that she is safe and (in unsubtitled Hindi) starts to say "God is with you" but the phone connection cuts off in the middle of the sentence. With detached irreverence, Jamal simply guesses the correct answer (Aramis) to the question of the one musketeer whose name they never learned, and wins the grand prize. Simultaneously, Javed discovers Salim helped Latika escape. Javed and his men break down the bathroom door and Salim shoots Javed. Javed's men then come in and shoot Salim multiple times. Salim's last words are "God is great." Later that night, Jamal and Latika meet at the railway station and they share a kiss. It is then revealed that the correct answer to the opening question is "D) it is written", implying that Jamal's story is his destiny. During the closing credits, Jamal and Latika—along with hundreds of bystanders and even the younger versions of themselves—dance in the CST train station to the song "Jai Ho".