The film revolves around a small village. Badri, (Manoj Joshi) heads a Brahmin family whose ancestral palace is believed to be haunted by a ghost of Manjulika, a Bengali dancer. One day, Siddharth (Shiney Ahuja) and Avni (Vidya Balan), the son and daughter-in-law of Badri's elder brother, return to their native village from America and decide to stay for a month in their ancestral palace. Here, Siddharth is crowned as the king, his right to the throne.
Events take a twist when Avni opens a locked forbidden room that contains the ghost of Manjulika with the help of Nandini (Tareena Patel) who is Siddharth's cousin. Unnatural events start taking place inside the palace. Avni ends up falling in love with the place and begins to learn about Manjulika and her tragic story. Badri and Batuk Shankar (Paresh Rawal) try to ward off the evil eye with the help of a priest and philosopher Shri Yagyaprakashji Bharti (Vikram Gokhale), but unfortunately the priest has gone to London and is unsure when he might be back. They try to force back the so called 'evil ghost' of Manjulika to her room with the help of a local priest Chhote Pandit (Rajpal Yadav) but their attempt fails and the priest after seeing the moving shadow of Manjulika coming towards him, ends up being a mad man.
Siddharth starts to suspect Radha (Ameesha Patel) for all the weird things going around. He thinks that she has gone mad, since he was supposed to marry her, but instead ended up marrying Avni. So, he calls his friend/psychiatrist Dr. Aditya Shrivastav (Akshay Kumar) to try to figure out what the problem is with Radha. Later, it is discovered that Radha is actually Badri's adopted daughter and that he brought her up as if she were his own.
Once Aditya reaches the palace things start to become comical as no one in the palace likes him and thinks he is fool due to the way he dresses and acts. Aditya starts to use modern analytical techniques to find out the reason behind the so-called ghost problem. He eventually realizes that Radha is not at fault, and that there was someone else behind it all. One night, while patrolling the palace, he also encounters the so-called Manjulika and dares her to strike. The ghost, in return vows to take her revenge on the auspicious day of Durgashtami.
During the engagement of Nandini with Sharad Pradhan (Vineeth), Avni ends up spilling food on Sharad, and takes him away to get him cleaned. Aditya than notices that Avni is missing and so he asks Siddharth to help him find her. When they do, they see that there is a struggle between Avni and Sharad, and they eventually end up breaking the struggle and Siddharth begins to hit Sharad thinking that he was going to violate Avni. But, Aditya tells him that she is actually the culprit and that she has Dissociative Identity Disorder, a disease that affects the person's identity. To make sure that things work out the way they are supposed to he must bring out Manjulika's identity. In order to support his argument, Aditya reveals that he has visited Avni's hometown to gather information about her childhood and he has factual evidence. He then asks the half-convinced Siddtharth to provoke Avni in order to make her realize that something is wrong. When Siddharth does this, Avni shows personality of Manjulika before coming to her usual self, much to the concern of Siddharth, who asks Aditya to do anything to save Avni.
They then see her as Manjulika dancing to the tunes she had been dancing to with her love Shashidhar before the king killed him. Through this the sad love story of the old king Vibhuti Narayan, who loved a dancer, Manjulika, who, in turn, loved Shashidhar (the dancer in the same court) is revealed. Avni, while possessed by Manjulika's personality, imagined herself and Sharad, (whom she thinks is Shashidhar), dancing in the court of the king. This triggered Avni's disorder; she assumes the identity of Manjulika and tries to kill her own husband Siddharth, as she sees him as Vibhuti Narayan who killed Manjulika's lover and later locked her up in her room where she committed suicide.
In order to cure Avni of her illness, Aditya triggers Manjulika's personality and makes her promise to leave if Manjulika gets the opportunity to kill the king and have her revenge. Meanwhile the priest Shri Yagyaprakashji Bharti (who happens to be Aditya's guide) also arrives to visit Siddharth. With his help, during the ritual of Durgashtami, Manjulika is tricked and slays a dummy of Siddharth thinking she was killing the king. After the killing, Manjulika's personality leaves Avni forever. Aditya hypnotizes the unconscious Avni and tells her that everything is fine and that she will continue her life as a same, happy and peaceful person. Everything ends well and Aditya tells Radha that he will send his parents if she is interested in marrying him.