Mauji Sharma (Varun Dhawan) is a small-town man who lives with his parents and wife Mamta (Anushka Sharma). His late grandfather used to work as a tailor in the neighbourhood handicraft business. The trade eventually shut down, leaving Mauji's family on the verge of bankruptcy. His father Parasram now works as a government employee and is about to retire. Mauji is an errand boy in a shop that sells sewing machines, where he is constantly ridiculed and demeaned for the amusement of his boss. He secretly bemoans the fact that his interactions with Mamta are very limited owing to the lack of space, and her being perpetually busy with household duties. In spite of all this, he is a good-natured and optimistic person. He is also a skilled tailor, and often does small mending jobs on a sewing machine borrowed from his neighbour and friend Yogesh.
While attending the wedding of one of Mauji's employers, Mamta witnesses the kind of treatment her husband receives at work, which leaves her visibly upset. She urges him to revive the family trade, insisting that self-respect is more important than money. Mauji brushes this suggestion off, aware of the risks associated with it. Even so, her words play on his mind and he ends up resigning, much to Parasram's disapproval.
After Mauji's mother suffers from a heart attack, the family is thrown into deep waters as with Parasram now retired, they cannot afford the treatment. Mauji's elder brother Jugnu, who lives separately with his wife and son in the same locality, informs him of a clerical job in Meerut. Mauji declines it, and with his wife's support, sets up a roadside tailoring shop in the town market area. He stitches a hospital gown for his mother, which Mamta embroiders. The garment attracts the attention of other patients who also demand one, prompting the two to devise a new moneymaking scheme. Jealous of Mauji's success, Yogesh takes his sewing machine back. The couple journey across the state border to successfully obtain a sewing machine distributed to the underprivileged by the Government.
Mauji's activities in the hospital come to the notice of the authorities. Jugnu's brother-in-law Guddu, who is friendly with the staff, asks him and Mamta to manufacture the hospital gowns under the label of the clothing company he works at. He also offers them both jobs at the factory. After much deliberation, the two take the job, knowing that they are in dire need of the money. The owner of the company, Harleen Bedi, is a cunning woman who takes advantage of their gullible nature, resulting in them handing over the rights to their clothing and embroidery designs. Mauji becomes increasingly discontent at having been duped, and picks a fight with Guddu. He is thrashed and thrown out of the factory; Mamta quietly follows suit.
Utterly humiliated, the couple decide to enter themselves into the annual Raymond Fashion Fund competition for upcoming designers, which Harleen is also participating in. They name their company Sui Dhaaga: Made in India. After their initial designs are shortlisted by the jury, they approach all the former artisans in the neighbourhood to help them out and participate in the final fashion show. Eventually, Parasram also comes around and lends a hand. On the day of the fashion show, their clothes are highly appreciated by everyone for their originality. Shortly before the results are announced, two of the judges let slip that while any other designer in their place would have easily won, their lack of experience worked against them. Crestfallen, the team make their way back to catch the bus home. Meanwhile, the judges re-evaluate their decision and declare Team Sui Dhaaga as the winners. Everyone is called back and as they all walk the ramp again, Mauji and Mamta are elated at having their dreams finally come true.
As the end credits roll, it is shown that the family is free from their financial struggles, Sui Dhaaga's designs are being marketed all over the world, and Mauji and Mamta have opened up a tailoring school to encourage others like them to become self-reliant.