The film begins where its predecessor ended, with reigning don Shoaib Khan earning respect after his mentor, Sultan Mirza handed over his power to Shoaib in 1975, only to be assassinated by him as revenge for a public humiliation immediately after.
Twelve years later, in 1987 , Khan is still a charismatic, suave womaniser, who has extended his empire to the Middle East. His only friends are Javed (who oversees his illegal work), his former love Mumtaz, and Aslam, a teenager Khan met during a visit to the slums in which he grew up.
An older Khan returns to Bombay to kill Rawal, who opposed his ambition to take the reins in Bombay. Although the city was his first love, rising starlet Jasmine wins his heart. Khan advances Jasmine's career by rigging awards, and showers her with gifts; he becomes obsessed with her. He sends Aslam and another trustworthy aide, Jimmy, to kill Rawal. Jimmy fails, accidentally killing his girlfriend, Mona, and flees. He is soon captured by the police, hot on Khan's trail after learning about his arrival in Bombay. Jimmy, loyal to Khan, does not crack during his interrogation and is freed due to lack of evidence. The police intend to draw Khan out from hiding; he has eluded them for twelve years, and this is their last chance to take him on Indian soil.
Khan, suspicious that Jimmy has become a police informer, decides to kill him but Aslam offers to do the deed to deflect police attention. He, Dedh Tang and several thugs masquerade as rival biker gangs and stage a brawl. Plain-clothes police officers try to control the chaos when Aslam corners Jimmy. When a police officer stops Aslam, Khan appears out of nowhere, murders Jimmy and injures the policeman. A chase ensues; the police fail to catch the two, who escape in Khan's Mercedes.
Although Khan has bought Jasmine a house, she rejects his advances, saying that she has never seen him as being more than a friend. Angry and disappointed, Khan slaps her and tells her to leave. He angrily destroys the set of the film she is cast in, leaving with her a twenty-four-hour deadline to accept his proposal. Jasmine returns home to see that Khan has filled her house with expensive presents. Her mother is taken aback when Jasmine explains that Khan is a gangster with whom she'd prefer not to associate. Her family questions the sense in rejecting a man as powerful and dangerous as Khan.
Later in the night, Jasmine meets Aslam at his uncle's restaurant. He tries to explain his love for her, only to be interrupted and told that she is engaged and the two should stop seeing one another. Dejected and disappointed, Aslam meets with Khan, who seems unusually pensive. The two lament their relationships, not knowing they are both in love with the same woman. Just before Khan is about to reveal the name of his romantic interest, a phone rings – Khan, jubilant, announces that his proposal has been accepted and orders Aslam to pick up his new "bhabhi," or sister-in-law.