Raja Hindustani is a story about two people from opposite socio-economic backgrounds who fall in love. The title character, Raja Hinustani (Aamir Khan), is a taxi-driver cum tourist guide. He lives by his own simple code and is prone to violence when that code is violated. Aarti Sehgal is a wealthy debutante who is seeking to connect with her past. Standing in the way of their love are a disapproving father and a stepmother bent on obtaining total control of the family assets.
Wealthy Mr Sehgal (Suresh Oberoi) lives with his daughter, Aarti (Karisma Kapoor), and her stepmother Shalini (Archana Puran Singh) in a palatial home. Aarti decides to go for a vacation to a small hill station named Palankhet to discover the memories of her dead mother. Upon arrival, she finds out she has no transportation from the airport to Palankhet. As a result, she hires the services of the only available driver, Raja Hindustani (Aamir Khan).
During her stay in Palankhet, Aarti and Raja fall in love. One day, to Aarti's surprise, her father arrives in Palankhet and intends to bring her home with him. Her father will accept the marriage on the condition that Raja come to Mumbai and learn to become a respectable member of society. Raja refuses and forces Aarti to make a decision. Aarti chooses Raja, but begs for her father's blessings. Her father refuses to offer his blessings and leaves for Mumbai.
After some time, Mr Sehgal forgives his daughter, and visits her in Palankhet. While there, he gifts his daughter and son-in-law with a new house. Raja refuses to live in the house, because he does not see the house as a gift, but rather as alms , since he is poor and Mr. Sehgal is rich. Shalini, her brother, Swaraj (Pramod Moutho), and her nephew Jai (Mohnish Behl) seek to exploit this conflict in order to gain total control of Mr. Sehgal's assets. Under the pretext of a birthday party, they bring Raja and Aarti to Mumbai and set in motion events that will change all their lives forever.