Bobo (Emraan Hashmi) is India's top magician, a star. But unknown to even his beautiful girlfriend Tamara (Huma Qureshi), his life is falling apart. Hallucinations about his dead little sister Misha are casting a dark shadow on his life, threatening his very sanity. He is left with no option but to seek psychiatric help in the form of the rather odd Dr. Palit who puts him under regression hypnosis to go back to the distant past. When Bobo was 11 and Misha 6.
A terrifying childhood story surfaces in which a dark supernatural power, in the form of a daayan (witch) enters their life. A woman named Diana (Konkona Sen Sharma) moves in the building after Bobo goes to hell using the elevator, which causes her to surface. She charms Bobo's father and agrees to babysit the kids. She soon begins to become a part of the family, although the paranoid Bobo still believes she's a witch . On Diana's birthday during the night of the red moon she convinces the kids to a game of hide and seek in an attempt to sacrifice Misha in order to restore her dark powers. As she begins to look for the kids, Bobo peeks through his hideout to see what she's doing. Bobo's father returns claiming to have forgotten his keys and goes to look for them while Bobo goes to check on his sister. Finding the door locked Bobo beings to panic which brings his father to the door. Bobo's father knocks down the door only to find Misha lifeless in the trunk and a now undisguised Diana hovering over her body. Enraged, Bobo's father attempts to choke Diana but in vain as the now rejuvenated Diana kill him with her ear piercing screams. Diana moves to the window to perform the rest of her ritual . But the distraught Bobo finds his father's dagger and cuts off Diana's ponytail . A shocked Diana begins to crumble into dust but not before she reveals that everything she did, she did for him and promises to return for Bobo.
Dr. Palit dismisses Bobo's visions as just fantasy and convinces Bobo to do the same. After a brief outburst at the restaurant Bobo is knocked unconscious and taken to the hospital. Where Tamara learns about his hallucinations. He then asks Tamara to marry him and they adopt the ten year old Zubin. They are a happy family till the irresistible Lisa Dutt (Kalki Koechlin) enters their life during a magic show. Bobo's entire subconscious screams out 'the daayan is back'. The great magician is pitted against the supernatural.
But nobody believes him, not Tamara, not Dr. Palit. In fact everybody loves Lisa. She even buys his old house, adding to his suspicion. Bobo has to face the crucial question: is he losing his mind? Is it just his imagination that his life and family are under threat or is the daayan really back?
But his suspicion turns to belief when during Lisa's house warming party, Tamara falls off the balcony . A critical Tamara is taken to the hospital . A few days later Lisa comes to visit Tamara . As she tries to unhook Tamara's IV bag Bobo walks in and questions her in a fury . She claims that all she was trying to do is unhook the IV bag as it's empty . But the now aggressive Bobo tells her to get out.
Afraid for his family, he calls Dr.Palit and Dr.Palit agrees to help investigate further. Dr.Palit find a very disturbing truth and calls Bobo telling him that he was right all along. As Bobo reaches Dr.Palit's house he finds Dr.Palit dead and sees the erie lizard lurking about. He finds a paper clutched in Dr.Palit's hand, on which Zubin's name is scribbled. He rushes to the exhibition where Zubin is supposed to be, only to find him missing. He then rushes back to his old home too look for Zubin but finds it empty. So he jumps into the elevator and descends into hell. There, he finds that Zubin is lying on a sacrificial alter and that the "daayan" is ready to sacrifice his son's life to sustain her powers. Bobo tries to save Zubin, when he encounters Tamara. To his surprise, Tamara is the daayan.not Lisa. Then, Diana appears and tells him that he himself is a "pishaach". Tamara explains further by saying that no one could merely push buttons in an elevator and find hell. The fact that he is present with them, is the evidence of him being a pishaach. He tries to fight her, but she is enraged and tell Bobo that it took her 20 years to be reborn and that she won't let him kill her again. She knocks Bobo unconscious. When he gains consciousness, he recalls the book about black magic and realises that a pischaach, good or bad can regain his strength as it is the night of the red moon. With his acquired powers, he fights Tamara and supposedly kills her. Soon after that, he returns his powers back to Satan. As he picks up Zubin, the daayan now appearing as Diana reveals that only the pure and innocent can kill a daayan and since Bobo killed her once before as a kid he is no longer innocent . Angry that Bobo denied Satan's gift Diana attacks him with her hair since it is the origin of her strength. Powerless, he tries to fight with her only to be flung around. Bobo grabs on to a pillar and the amused Diana once again imobilizes him with her high pitched screeches but Bobo kicks the sacrificial dagger to the now conscious Zubin, and with his help, Zubin eventually cuts off Diana's ponytail. But the crumbling Diana once again promises that she will come back.
In the end Zubin asks him whether everything that happened was magic or witchcraft . Bobo tells him that everyone has a little of both in them. Bobo meets Lisa at the cafe and she asks him why he was so aggressive towards her initially . The screen fades to black as Bobo says, " I thought you were a daayan "