Underground depicts the life of two friends throughout World War II, Cold War, and the Yugoslav Wars.
The film opens in Belgrade, the capital of the Kingdom of Yugoslavia, early morning, 6 April 1941, as two roguish bon vivants Petar Popara nicknamed Crni (Blacky) and Marko Dren are heading home following a night out on the town. Riding atop a horse carriage while tailed and serenaded by a brass orchestra, they're drunkenly singing and shooting their way through the city's downtown. They pass through Kalemegdan and shout salutes to Marko's brother Ivan who's an animal keeper in the Belgrade Zoo. A stutterer with a lame leg, Ivan is already up to feed the animals and waves to them warmly as he records food portion amounts while listening to early morning radio bulletins.
As the drunk duo pulls up in front of Blacky's home, his pregnant wife Vera comes out to angrily usher her husband into the house while threatening to leave him "just like Marko's wife left Marko". Intoxicated Marko pulls Vera aside and lets her know that they enrolled Blacky in the Communist Party (KPJ), but she's way too angry about Blacky's irresponsible behaviour as a husband to properly process that piece of information. Blacky goes into the house while Marko proceeds on and picks up a street prostitute before disappearing into his house with her.
Part One: War
A couple of hours later, as Sunday dawns, Ivan is making rounds at the zoo to feed the animals, hungover Blacky is eating breakfast while pregnant Vera complains about his supposed affair with a theatre actress, and Marko is preparing for sex with his prostitute as he lecherously watches her take a scrub in his bath tub. Suddenly, the roar of the planes is heard, and Nazi bombs begin falling on Belgrade. In the ensuing chaos, as people run for cover (including Ivan desperately trying to save his beloved animals), unflinching Blacky and Marko show no signs of panic. The former stubbornly sits at his table eating his breakfast, cursing the Nazis as his wife pleads with him to go to the shelter, while the latter is about to climax with the prostitute on top of him when suddenly, frightened by the bombs, she runs away in horror thus forcing him to finish himself off.
After the air raid is over, Blacky goes out against the wishes of his wife and inspects the devastated city. Encountering building ruins and escaped wild animals from the zoo, he also runs into disconsolate Ivan carrying a baby chimp named Soni. Blacky's parting piece of advice to his best friend's brother is a stern: "Stop crying! You want the Germans to see you like that and laugh at you?" before giving him some money to buy milk for the monkey.
Royal Yugoslav Army's resistance is quickly broken, and Nazis soon occupy and dismember the entire Kingdom of Yugoslavia. Blacky starts operating clandestinely as a communist activist along with Marko and others. Their activism mostly consists of stealing German weapons shipments as well as jewellery and other valuables from the city's elite. In theory, the idea is to send all the weapons and money made from the stolen goods to Partisan guerrillas fighting in the woods, however, much to Blacky's dissatisfaction, many of the 'activists' are using the rackets for personal gain.
Blacky occasionally visits his mistress Natalija Zovkov who's been assigned to a special actors' labour brigade that's helping the city's rebuilding effort under German occupational control. An acclaimed, pampered, and celebrated actress in the National Theatre, Natalija is finding it hard to adapt to manual labour, especially as she has a sick, wheelchair-bound brother Bata to take care of. On one of his visits to the site where she's cleaning bricks, Blacky brings her a stolen necklace, which cheers her up momentarily, but she now generally sees their relationship as a liability fearing that it could only bring her trouble like being sent to the prison camp, especially after she heard about the bounty prize the Germans have set for his capture. However, she's not without options as she's caught the eye of a high-ranking German officer named Franz who is more than willing to indulge her and pay for Bata's medicine, meaning that her manual labour days are over.
Meanwhile, Marko has set up weapons storage and hideaway spot in the cellar of his grandfather's house. Following their interception of a large trainload of weapons, Marko and Blacky are mentioned by name and identified as dangerous bandits in Nazi radio bulletins. While Blacky is off hiding in the woods as Germans are intensifying door-to-door raids in the city, Marko takes Vera, Ivan and many others into the cellar to hide.
Vera is due any minute and gets contractions immediately upon entering the cellar. She's not feeling well physically and emotionally, and is especially mad about Blacky not being there for her. After giving birth to a baby boy, she instructs Ivan to name the baby Jovan before passing away on the cellar stairs as Ivan weeps inconsolably.
It's now exactly three years later, the war rages on, and Blacky is in town to celebrate his son's birthday at a local communist hangout. Despite the occasion being bittersweet (it is also the third anniversary of Vera's death), he's in his element: loud, brash, and boisterous - lighting a candle for his deceased wife before ordering rounds of drinks and proudly showing his son's photo around. Marko, who by now has progressed to the party secretary position, shows up and warmly greets Blacky before proceeding into the back room to make a weapons deal with some comrades. As Marko counts a huge stash of cash they've just given him, exuberant Blacky comes in and tells him to go out and buy the biggest bouquet of flowers available before giddily declaring: "there'll be a wedding". Blacky also inquires whether "everything is arranged about the priest's arrival", to which Marko assures him that it is all taken care of. As Marko leaves, Blacky goes back to the bar and picks a fight with some communist activists he knows to be weapons trade profiteers. In the middle of a fist fight, Marko returns with a requested bouquet and promptly joins the fracas on his friend's side.
The two best friends then head for the theatre in jovial mood while blurting out random lines from a Mayakovsky poem. The bravado and jocular tone are only briefly interrupted when Blacky states his disgust about activists within the organization using the situation for personal profit, urging Marko to do something about it "as party secretary".
Once in the theatre, they see Natalija performing on stage in front of beaming Franz and other German officers. Overcome by intense feelings of love and jealousy, Blacky forces his way backstage and enters the scene pretending to be part of the production. Speaking in broken German he requests the other actor to tie him and Natalija together back-to-back with a rope. With Natalija fastened to his back, Blacky walks up to the edge of the stage and shoots Franz twice in the chest before running away as chaos ensues inside the theatre.
With Natalija still strapped to his back, Blacky manages to reach the river boat anchored just outside of Belgrade. Naturally, Marko is along as well, in addition to a brass band, and all are getting ready for a forced wedding despite Natalija's protestations. Blacky criticizes his tied up bride-to-be for performing for Germans, lecturing her that other women take care of the wounded in the woods. Blacky goes off into the bushes to relieve himself, leaving Natalija tied in ropes, and instructs Marko to "take care of my bride". Blacky is approached by Partisan messenger who just arrived from the high command informing/threatening him that comrade Leka plans on taking disciplinary action against him if the weapons do not arrive soon. Blacky is not worried and brings the messenger into the boat to show him it is full of weapons.
While this is going on, Marko starts to put the moves on Natalija through belittling his best friend by pointing out class disparity between her "our greatest actress" and thuggish low-brow Blacky. He tells her that Blacky had been falsely presenting himself as an electrical engineer, when in fact he is "a mere electrician - a pole climber" by which she seems disgusted. Marko even brings Blacky's morals and communist resolve into question by telling her he has completely changed since he came into money. Suddenly, Blacky bursts in and roughs up both Marko and Natalija. Faced with Blacky's fury, she quickly changes her tune and assures him that she wants to marry him as Marko also pleads his case and denies any wrongdoing. Blacky is somewhat pacified, but still decides to humiliate Marko by riding him like a horse around the boat deck while the band is playing. The wild night of drinking and dancing continues. As dawn appears, the party is interrupted by German soldiers surrounding the anchored boat. Suddenly, Franz is seen yelling from the distance behind his soldiers, demanding Blacky and Marko release Natalija who runs off from the boat into Franz's waiting arms. Confused and angry, Blacky irrationally chases after her, but gets only as far as the boat ramp before Germans stop him with guns drawn. He yells back at Marko to open fire, but instead of heeding his request, Marko starts the boat up and sails off. Blacky is captured by Germans and tortured in the city hospital with electric shocks while Franz and Natalija visit her brother Bata at the same hospital and discuss moving him to a sanatorium in Austria. Meanwhile, Marko has found a way to enter the building through an underground sewer passage. Posing as a doctor, he enters the hospital room where Franz, Natalija and Bata are talking. Sneaking up on Franz, Marko strangles him to death with a cord in front of Natalija who switches sides once again. Marko then proceeds to free Blacky. They leave with fatigued Blacky hidden in a suitcase, but Blacky requests a bomb to commit suicide in case he is captured again. As they are all heading back through the sewer, Blacky drops the activated bomb by mistake and gets blown to bits inside the suitcase. He survives but requires an extended recovery period in the cellar.
A few days later on Easter 1944, Marko and Natalija, now an official item, are watching comatose Blacky from their living room as he recovers in the cellar below. They proceed to dance and exchange exaggerated tenderness as the allied bombs start to fall on Belgrade.
Soon, in late October 1944, the Red Army accompanied by Yugoslav Partisans enters Belgrade thus liberating the city from the Nazis for good. Marko, an important cog in the revolutionary movement is seen proudly waving the communist Yugoslav flag and victoriously exclaiming: "Freedom".
Over the coming years he advances up the party and state ladder: he gives fiery speeches from the National Theater balcony during the Trieste crisis, he socializes with Josip Broz Tito, Rankovi and Edvard Kardelj - attending lavish parties and going on foreign state visits with them, and he stands right next to Tito during military parades through downtown Belgrade. Throughout it all, Natalija is right by Marko's side.
Part Two: Cold War
Marko is one of Tito's closest associates and advisors. The physically recovered Blacky and company are still in the cellar under the impression that the War is still going on above.
Marko and Natalija attend a ceremony to open a cultural center and unveil a statue of Petar Popara Blacky whom everyone thinks died fighting the Nazis and is thus awarded the status of a People's Hero. Before delivering a keynote speech, Marko is approached by a film director who inquires whether he would allow Natalija to play a role in the film based on his own memoirs. Marko refuses but he does agree to visit the set.
Below ground, the full extent of Marko's meticulous deception is revealed. It goes to astonishing details: from time to time he stumbles down into the cellar looking haggard and beaten, pretending that Gestapo roughed him up so that the people below still think German door-to-door raids are on-going. He also regularly plays air-raid sirens as well as various newsreels that show Nazis holding strong on the Eastern Front, while urging restless Blacky to stay below and save his energy for the final battle. Marko even brings his best friend an engraved watch as a personal gift from Tito.
With the help of his grandfather who is in on the devious con, Marko oversees the weapons manufacturing and even controls time by adding hours to a day so the people in the cellar think that only 15 years passed since the beginning of World War II instead of 20. They're continuously making weapons, and Marko profits from it enormously.
The filming of an epic state-sponsored motion picture based on Marko's memoirs titled Prolee stie na belom konju (Spring Comes On A White Horse) begins above ground. Receiving a hero's welcome by the film's cast and crew, Marko and Natalija visit the set during shooting of the scene that erroneously depicts events on the anchored river boat in 1944.
Back home, Marko has prepared a text for Natalija to deliver to Blacky down below. The premise is that she's been raped and beaten by Germans, and left for dead. Natalija agrees to go along with it and in make-up that's making her look savagely beaten delivers a scripted "I love you" to Blacky who seems energized by her declaration.
Soon, Blacky's 20-year-old son Jovan is getting married to Jelena, a girl he grew up with in the cellar. Marko and Natalija are naturally invited for a celebration. Blacky pulls his son aside and tells him he can't wait any longer and that he will go above to fight as soon as everyone's gotten drunk. He also relays his frustration about being told to wait for Tito, the party, or the Russians, also stating his decision to take matters into his own hands.
At the other table, all is not well with Natalija and Marko as she, influenced by alcohol, starts making a scene accusing Marko of stealing her youth and bemoaning her bad luck to have ever come across him. She soon begins admonishing him for the crime he got himself involved in, but he soon pacifies her.
However, Blacky has heard their conversation and instead of personally killing Marko he hands him a gun and tells him to finish it himself. Blacky proceeds to tie Natalija to his back while Marko instead of committing suicide, blows out his own kneecaps with a gun. As he's doing that, Ivan's monkey Soni has wandered into a tank and fires a round blowing a hole in the wall. Soni wanders off, and Ivan follows.
Blacky with Natalija tied to his back goes out and calls his son Jovan along. Along the way through the underground corridors, he lets Natalija go, reasoning that "women and revolution don't go together" with a promise of reuniting soon.
Blacky, with his son Jovan, emerges from underground for the first time in decades. They encounter the set of Spring Comes On A White Horse and believing WWII is still on, they kill 2 extras and the actor playing Fritz, believing them to be the real thing. In the manhunt Jovan drowns but Blacky escapes.
Part Three: War
The final section is set in 1992 at the height of the Yugoslav Wars. Ivan re-emerges with Soni, whom he was recently reunited with. He stumbles upon Marko, who is attempting to broker an arms deal in the middle of a conflict zone. The deal falls through and Ivan catches up with Marko beats him to unconsciousness and then commits suicide. Natalija arrives and rushes to Marko's side, proclaiming her love for him. They are captured by militants and they are ordered to be executed as arms dealers by militants' commander, Blacky.
Blacky moves his people out to the cellar that he lived years ago. taking Soni with him. He sees an image of Jovan in a well, and inadvertently falls in while reaching for him.
In a surreal ending, all friends and family, living and dead, are reunited at Jovans wedding, where Ivan (no longer stuttering) ends the film with a closing monologue.