Ishaan Nandkishore Awasthi (Darsheel Safary) is an eight-year-old boy who dislikes school and fails every test or exam. He finds all subjects difficult, and is belittled by his teachers and classmates. But Ishaan's internal world is rich with wonders that he is unable to convey to others, magical lands filled with colour and animated animals. He is an artist whose talent is unrecognised.
Ishaan's father, Nandkishore Awasthi (Vipin Sharma), is a successful executive who expects his children to excel. His mother, housewife Maya Awasthi (Tisca Chopra), is frustrated by her inability to educate her son. Ishaan's elder brother, Yohaan (Sachet Engineer), is an exemplary scholar and athlete, which Ishaan is frequently reminded of.
After receiving a particularly poor academic report, Ishaan's parents send him to a boarding school. There he sinks into a state of fear and depression, despite being befriended by Rajan (Tanay Chheda), physically disabled and one of the top students in his class. Ishaan's situation changes when a new art teacher, Ram Shankar Nikumbh (Aamir Khan), joins the school's faculty.
An instructor at the Tulips School for young children with developmental disabilities, Nikumbh's teaching style is markedly different from that of his strict predecessor, and he quickly observes that Ishaan is unhappy and contributes little to class activities. He reviews Ishaan's work and concludes that his academic shortcomings are indicative of dyslexia.
On his day off, Nikumbh visits Ishaan's parents and asks if he can see more of their son's work. He is stunned by the sophistication of one of Ishaan's paintings, and tells his parents that Ishaan is a bright child who processes information differently from other children in his class, but Ishaan's father is suspicious that the explanation is simply an excuse for his son's poor performance. Nikumbh demands that he read some Japanese text on a box and berates him when he cannot, giving him a glimpse into Ishaan's experience of school. Nikumbh describes dyslexia to them and explains that it is not a sign of low intelligence. He tells them he can provide extra tutoring that will help Ishaan, highlighting the boy's artistic ability evident in his many paintings and other creative works.
Nikumbh subsequently brings up the topic of dyslexia in class, and offers a list of famous people who were dyslexic. As the students are leaving the classroom, Nikumbh asks Ishaan to remain behind and reveals to him that he too experienced the same difficulties with dyslexia. Nikumbh then visits the school's principal and obtains his permission to become Ishaan's tutor. He attempts to improve Ishaan's reading and writing by using remedial techniques developed by dyslexia specialists; Ishaan soon develops an interest in language and mathematics, and his grades improve.
Towards the end of the school year Nikumbh organises an art fair for the staff and students. The competition is judged by artist Lalita Lajmi. Ishaan, with his strikingly creative style, is declared the winner and Nikumbh, who paints Ishaan's portrait, the runner-up.
The principal announces that Nikumbh has been hired as the school's permanent art teacher. When Ishaan's parents meet his teachers on the last day of school they are left speechless by the transformation they see in him. Overcome with emotion, Ishaan's father thanks Nikumbh. As Ishaan is getting into the car to leave with his parents, he turns around and runs toward Nikumbh. The film ends with a freeze frame shot of Nikumbh tossing Ishaan into the air.