Protagonist Om Prakash Makhija (Shahrukh Khan) is a junior artist in the 1970s Bollywood film industry. He and his friend Pappu (Shreyas Talpade) are trying to succeed as leading actors. Om's mother, Bela Makhija (Kirron Kher), herself a junior artist, inspires and encourages her son to become a success. He is in love with the film actress Shanti Priya (Deepika Padukone).
One evening, Om views the premiere of Shanti Priya's film Dreamy Girl, claiming he is the actor Manoj Kumar. Here, scenes from older Bollywood films are used to form the scenes seen by Om on screen. He is shown fantasizing himself as its lead and catching Shanti Priya's eye before Dreamy Girl begins and during its display. Later that night, Om becomes drunk and describes his vision of himself as a famous, wealthy film star to Pappu and some local children. During his speech, references are made to the Law of Attraction, creating an axiom that recurs throughout the story.
On another occasion, during a shooting of a film wherein Om is acting as a scene-extra, he notices Shanti trapped in the middle of a fire scene where the fire has escaped control. When the lead actor of the film fails to save her, Om saves her instead and they become friends. He initially attempts to overawe her by pretending that he is the lead and producer of his own films, but ultimately confesses and finds the attempt unnecessary. That night, Om invites Shanti to a film set, where Om, assisted by Pappu, uses props and several backgrounds to create fantastic backgrounds against which develops a romantic song sequence.
The following day, Om tries to talk to Shanti on the set of a film, but is almost ignored. He follows her into a dressing-room, where he, unseen except by the viewer, overhears her argument with the film's producer Mukesh Mehra (Arjun Rampal) about a recent promise of Mukesh's to marry a businessman's daughter in return for funding of a film. It is here revealed that Shanti is secretly married to Mukesh, and that Shanti is pregnant with Mukesh's child. Mukesh insists that his relationship with Shanti be kept secret, arguing that its revelation will spoil his plans, but Shanti demands that they marry in public. Mukesh relents when she reveals her pregnancy. Om leaves, disappointed, and remains miserable for some days.
One night, Om notices Mukesh escorting Shanti to the set of their planned film Om Shanti Om. Inside, Mukesh tells Shanti that he will cancel the film, reveal their marriage to the public, and have a grand wedding in the spectacular set, but contradicts himself by blaming her for his loss of the film and its revenue, igniting a fire in the set, and leaving her imprisoned inside it. Om attempts to rescue her, but is attacked by Mukesh's men. When they leave him, Om enters the set, but is prevented by an explosion from rescuing Shanti and she finally gets killed. Om, having been fatally injured and propelled by the explosion into a road, is hit by a car owned by Rajesh Kapoor (Javed Sheikh), a well-known actor who is taking his wife (Asawari Joshi) to a hospital for the birth of their child. Rajesh Kapoor then takes Om to the hospital with them, but Om dies of his injuries. Moments later, a son is born to Rajesh Kapoor, who is named Om and implied to be Om Prakash's reincarnation. The film then cuts to the younger Om's adulthood, wherein he is a popular movie star and lives an extravagant, luxurious life. He experiences pyrophobia and appears overall to be a younger, more impatient, brusquer, and less emotionally mature version of his previous self. It is shown through some scenes that he subconsciously inherits Om Prakash's memories.
Having been introduced to Om Kapoor, his lifestyle, and his nickname of "O.K.", viewers see him becoming aware of Om Prakash's memories when his film crew use the site of Om Prakash's death as the setting of his new film. Here, O.K. sees images of Mukesh's argument with Shanti Priya, which vanish when he is disturbed by a crewmember. Later, O.K. is awarded 'Best Actor' during a ceremony featuring both existing and fictional Bollywood films and film stars (listed below). When making a speech of acceptance for this award, O.K. unexpectedly recalls the drunken speech Om Prakash had made to Pappu, and makes it to the assembly who have awarded him. Pappu, seeing this broadcast on television, is convinced to share Bela's conviction that O.K. and Om Prakash are the same man. At a celebration of his award (again featuring numerous Bollywood film stars, and accompanied by a song whose refrain is the film's title), O.K. is introduced by his father to Mukesh Mehra, who has been producing films in Hollywood for thirty years. Upon seeing him, O.K. becomes aware of all of Om Prakash's memories. He conceals his knowledge of Mukesh's past, but later reunites with Bela and Pappu. He then conspires with them to avenge Shanti Priya's death by terrifying Mukesh into confessing his role therein.
As a disguise and framework for this plan, O.K. convince Mukesh to recreate Om Shanti Om, altering the plot to fit their designs. It is then shown that the central part of their scheme consists of convincing Mukesh that Shanti Priya's ghost is haunting him, thereby frightening him into revealing his role in Shanti's death. To achieve this, they hold auditions for an actress who resembles Shanti Priya to the extent that seeing her unexpectedly appear and seem to vanish will startle Mukesh. They find an actress named Sandhiya ("Sandy" for short), who is a huge fan of O.K., though she is very clumsy but her resemblance to Shanti is uncanny. O.K. and his co-conspirators train Sandy to represent Shanti's ghost, but achieve no success, on account of her clumsiness, until they have told her the entirety of their plans and the reason thereof. Thereafter the filming begins. Throughout the film shootings, O.K. and his friends arrange incidents, some involving brief appearances by Sandy, that frighten Mukesh, arrange the situation itself to remind him of his crime, and exacerbate his fear almost to insanity in their (chiefly O.K.'s) conversations with him. Their plan goes awry when Mukesh investigates their arrangements and begins to suspect that they are deceiving him. During the music launch of the film, O.K. taunts Mukesh by revealing the extent to which he knows the story of Shanti Priya's death, in the process implying that his film's plot imitates that story. Toward the end of this scene, Mukesh pursues Sandy and sees that she is capable of bleeding, persuading him that she is not a ghost.
After the celebration, O.K. and Mukesh confront each other with their knowledge of each other's actions. They are interrupted when a figure whom they think to be Sandy appears on the nearby stairwell and reveals that Mukesh had returned to the burning film set after its explosion, found Shanti dying but not dead, and buried her in the center of the set, beneath its chandelier. Mukesh himself is killed when an identical chandelier, located in the same position, falls onto him, having come loose during the celebration. Moments later, Pappu and Sandy join O.K., whereupon O.K. realises that the figure who challenged Mukesh is Shanti Priya's ghost. As he realises this, the ghost smiles and runs up the stairwell and then disappears. Om Kapoor and Sandy walk hand and hand together towards the door, ending the movie.
