Palunku movie tells the story of Monichan (Mammootty) who is a farmer and who lives with his wife, Susamma (Lakshmi Sharma) and two daughters. The village school has no facilities and he had to admit the kids in a city convent. He also starts his studies at Adult education centre run by Teacher (Nedumudi Venu).
He meets Soman Pillai (Jagathy Sreekumar), who with his cleverness traps Monichan into the world of deceit. Susamma also likes the city life and the family shifts to the city. What follows is the outcome of the new and unexpected twists of life.