NOTE: This spoiler was sent in by MJSpice!
The movie is rather a tribute to the Bollywood industry & many of the jokes throughout the film can only be understood with prior knowledge of the old movies or actors.
Set in the 1970's, Om Prakash Makhija (Shah Rukh Khan) is a junior artist in the film industry. He and his friend Pappu (Shreyas Talpade) are trying to become big heroes one day. Om's mother, Bela Makhija (Kirron Kher), inspires and encourages her son to become a hero. Om's whole family consists of junior artists. Om's love interest is the country's heart throb and the star of the film, Dreamy Girl, Shantipriya (Deepika Padukone).
During the Dreamy Girl premiere, the pallu (scarf) of Shanti's sari gets entangled with Om's hand. Pappu steals an exclusive pass that belongs to Mr. Manoj Kumar to watch the premiere, but have to run out when the real Manoj Kumar appears. While being dragged out of the theater Om manages to get Shanti's attention and he swoons under her gaze.(He does this alot).
During the shooting of film in which Shanti stars and Om is an extra, the set catches fire in an uncontrolled manner. Shanti is trapped inside the set and Om rescues her, hurting himself. After the incident, Shanti comes to thank him personally, and incidentally she overhears Om's love for her. They become good friends. Pappu says to Shanti that Om is a big superstar of south India film industry, and even calls her to watch him during a shoot. A hilarious scene of Om fighting the bad guys & a stuffed tiger in true South Indian style being shot by a fake crew occurs. However, the truth is revealed to Shanti that he is really a junior artist and not a big star. She tells him that she thinks that he is a star to her, and he can ask her to do anything he wants, except jump into a fire. He asks her to spend one evening together.
Shanti comes to meet Om hidden in a muslim woman's burkha. Om asks Shanti to bring out her hand and ask for love to anyone she loves. After that day they often meet each other. Next day Om manages to pass security and tries to meet Shanti in her dressing room. He overhears that Shanti is already married to the producer Mukesh Mehra (Arjun Rampal). Mukesh first says that he wants to keep their marriage under wraps as a married heroine is not accepted in tinsel town. Mukesh also tells Shanti that he cannot officially accept this because a rich businessman is financing his upcoming film Om Shanti Om for which he requires 40 lakhs rupees. The truth is he is getting married to the daughter of the businessman. Shanti then reveals that she's pregnant & Mukesh is overwhelmed. Om gets heartbroken and tries to avoid Shanti.
One night as Om is sitting near a set of Om Shanti Om he finds Mukesh and Shanti driving in to the set. Unknown to them, Om creeps into the set and sees Mukesh telling Shanti that he has decided to cancel the film and he is going to reveal his marriage with her to the public. He also tells Shanti that he will destroy the set after they have a marriage ceremony on it. Om hears all of this and leaves, unable to hear anymore.
After Om is gone, Mukesh changes his behavior and he holds Shanti responsible for his financial loss and sets fire in the set of the film. Om sees Mukesh going away in his car & Shanti trapped inside, crying out for help. He tries to help her, but Mukesh's security guards beat him up. Even after the beating, Om tries to save Shanti by going into the set, but in vain. A blast occurs Om is thrown outside and he sees the set explode, killing Shanti. As he runs for help, he is hit by a car owned by Rakesh Kapoor (Javed Sheikh), a well known actor who was rushing his pregnant wife to a hospital. Rakesh takes him to the hospital, but Om dies.
The film moves 30 years on after the incident. Om is reincarnated as Om Kapoor, son of Rakesh Kapoor, who was born right after Om Makhija dies and has a burn mark like the Om sign on his wrist (where Om had a tattoo). He is seen as a rising star, a star's kid, and a rich brat, who is also known as "OK". During the shooting, Om freaks out because of the special effects fire eruptions & it is revealed that he is terrified of fire.
Om Kapur sees Om Makhija's mother running along side his car. He does not recognize her yet but she recognizes him. Deciding to move onto a new film project, he has his assistant set up a shoot for the next day. They choose the same burnt studio and set of the old Om Shanti Om. As soon as he sees it, Om gets the feeling that he has been there before. As Om visits the burnt set, he remembers everything about his past life. The Filmfare Award ceremony follows, in which Om wins best actor. During the party that follows, he meets Mukesh now Mikey, who has been a popular Hollywood producer for the past 25 years.
Om goes to meet Pappu and Bela, Om's mother. He decides to remake the film Om Shanti Om with Mukesh as a way to trap him into confessing for his crime. During the audition for the role of Shanti, the crew meets Sandy or Sandhya, a look-a-like of Shantipriya who swoons the same way he used to swoon whenever he saw Shanti.
Sandy is then trained to walk & talk like Shantipriya. Om lashes out at her when she starts laughing while she's reciting a serious dialogue. He then reveals is story to her & Sandy then says that she would've believed him anyway because she loves him.
Om then takes Mukesh to the burnt film set (where he killed Shantipryia) to announce the beginning of the film. Here, Om tries to re-enact the whole murder with the help of the new cast of Om Shanti Om with a young actress who Mukesh often looks at with lecherous intentions. Sandy often appears to make Mukesh believe that Shanti has turned into a ghost & he begins to believe that he's going crazy.
Later on at the launch of it's music release, Om does a song & dance number where he reveals the whole story. Suddenly a chandelier hits Mukesh's head, making him unconscious. After he wakes up, he finds there is no one in the set except him and Om. Om faces Mukesh and they started fighting. Mukesh reveals that he knows about the plan & his fake Shanti. Sandy appears and starts to speak lines which were not part of their plan, lines that nobody knew about. She reveals that Mukesh came back after burning the set to take care of her body and buried her underneath the set's floor even though she was still alive. Om realizes that she is actually Shanti's ghost when Sandy & his friends burst through the front door. The ghost Shanti kills Mukesh by making a chandelier fall on him. At the end, Om sees the ghost of Shanti tearfully bid him good-bye. She and runs up the stairs and disappears. It is implied that Om and Sandy (who was never the reincarnation of Shantipriya) get together in the end.