Raees (Shah Rukh Khan) lives in Gujarat, a state where Prohibition is in force and gets involved in illegal liquor trade at a very young age. Along with Sadiq (Mohammed Zeeshan Ayyub), Raees works for a gangster Jairaj (Atul Kulkarni), who smuggles alcohol illegally by bribing the police. Raees lives by the philosophy of his mother that every occupation is good, and no religion is greater than any occupation as long as it does not cause any harm to anyone. He decides to part ways with Jairaj and start operating on his own. He meets Musabhai (Narendra Jha) in Mumbai, and with his help he starts his bootlegging business. Meanwhile, an honest police officer of the IPS cadre, J. A. Majmudar (Nawazuddin Siddiqui) gets transferred to Fatehpur, and starts a major crackdown on alcohol dealers.
Gujarat's Chief Minister and Pashabhai, a shrewd politician supports Raees for liquor and money. With his money, intelligence and tact, Raees consistently find ways to avert Majmudar and continues on with his trade. He also assists his community by offering employment to women to sew cloth bags, which he uses to smuggle alcohol and get them delivered to homes. In the meantime, Raees marries Aasiya (Mahira Khan). Due to his differences with Raees, Jairaj tries to get him killed but survives and kills Jairaj.
Raees and Aasiya have a baby son named Faizan. Raees invites CM, Pashabhai and many others to celebrate with him. Raees is then offered a project by the CM to eliminate the illegal occupants at a land and construct a housing project. Raees manages to get Majmudar transferred to control room department. However, tables turn as Majmudar starts tapping Raees' telephonic conversations. Raees assaults Pashabhai during his election campaign. The CM advises Raees to go to jail for a while for his act. While still locked up, the CM and Pasha form an alliance. To counter them, Raees decides to fight the election from jail and wins.
Meanwhile, Majmudar gets transferred back to Fatehpura. Communal riots break out in the state. Considering Raees a threat, the CM puts the housing project in green zone. Raees suddenly finds himself broke with all his money dwindled on housing project, elections and dispatching food supplies during riots.
Musabhai offers Raees money for an assignment to smuggle gold. Serial bomb blasts rock North India. Police investigations lead to Raees, where the gold he smuggled, contained RDX. A heartbroken and grieved Raees kills Musabhai for betraying his trust and killing innocent people to incite communal riots. Majmudar orders his officers to shoot Raees at sight, but Raees brings press with him and surrenders and is well aware Majmudar would kill him. Majmudar takes him to an isolated place and shoots him.