In 2006, eighteen-year-old Jamal Malik (Dev Patel), a former street child (child Ayush Mahesh Khedekar, adolescent Tanay Chheda) from the Juhu slum, is a contestant on the Indian version of Who Wants to Be a Millionaire?, and is one question away from the grand prize. However, before the INR20 million (US$330,000) question, he is detained and harassed by the police, who suspect him of cheating because of the impossibility of a simple "slumdog" with very little education knowing all the answers. Jamal recounts, through flashbacks, the incidents in his life which provided him with each answer. These flashbacks tell the story of Jamal, his brother Salim (adult Madhur Mittal, adolescent Ashutosh Lobo Gajiwala, child Azharuddin Mohammed Ismail), and Latika (adult Freida Pinto, adolescent Tanvi Ganesh Lonkar, child Rubina Ali). In each flashback Jamal has a point to remember one person, or song, or different things that lead to the right answer of one of the questions. The row of questions does not correspond chronologically to Jamal's life, so the story switches between different periods (childhood, adolescence) of Jamal. Some questions do not refer to points of his life (cricket champion), but by witness he comes to the right answer.

Jamal's flashbacks begin with his managing, at age five, to obtain the autograph of Bollywood star Amitabh Bachchan, which his brother then sells, followed immediately by the death of his mother during the Bombay Riots. As they flee the riot, they run into a child version of the God Rama. Salim and Jamal then meet Latika, another child from their slum. Salim is reluctant to take her in, but Jamal suggests that she could be the third musketeer, a character from the Alexandre Dumas novel (which they had been studying — albeit not very diligently — in school), whose name they do not know. The three are found by Maman (Ankur Vikal), a gangster who tricks and then trains street children into becoming beggars. When Jamal, Salim, and Latika learn Maman is blinding children in order to make them more effective as singing beggars, they flee by jumping onto a departing train. Latika catches up and takes Salim's hand, but Salim purposely lets go, and she is recaptured by the gangsters. Over the next few years, Salim and Jamal make a living travelling on top of trains, selling goods, picking pockets, working as dish washers, and pretending to be tour guides at the Taj Mahal, where they steal people's shoes. At Jamal's insistence, they return to Mumbai to find Latika, discovering from Arvind, one of the singing beggars, that she has been raised by Maman to become a prostitute and that her virginity is expected to fetch a high price. The brothers rescue her, and Salim draws a gun and kills Maman. Salim then manages to get a job with Javed (Mahesh Manjrekar), Maman's rival crime lord. Arriving at their hotel room, Salim orders Jamal to leave him and Latika alone. When Jamal refuses, Salim draws a gun on him, and Jamal leaves after Latika persuades him to go away (presumably so he wouldn't get hurt by Salim).

Years later, while working as a tea server at an Indian call centre, Jamal searches the centre's database for Salim and Latika. He fails in finding Latika but succeeds in finding Salim, who is now a high-ranking lieutenant in Javed's organization, and they reunite. Salim is regretful for his past actions and only pleads for forgiveness when Jamal physically attacks him. Jamal then bluffs his way into Javed's residence and reunites with Latika. While Jamal professes his love for her, Latika asks him to forget about her. Jamal promises to wait for her every day at 5 o'clock at the VT station. Latika attempts to rendezvous with him, but she is recaptured by Javed's men, led by Salim. Jamal loses contact with Latika