"Khoobsurat", as the name suggests, is a beautiful, musical love story whose main characters, with the help of each other, start liking themselves and recognise the beauty of their own souls. Shivani (Urmila Matondkar) is the only child of Dilip (Om Puri), who has turned alcoholic after his wife's death. She is a simple, innocent girl. Being motherless, she feels lonely yet tries to live a normal life. She is confused, lost, annoyed with herself and fed up of life. Am I beautiful? she asks herself. And wonders whether anybody would ever like her.

Dilip's father, Dinanath Chaudhary (Anjan Srivastava), has passed on his business to Dilip and his two younger brothers - Mahesh (Ashok Saraf) and Satish (Jatin Kanakia). There is tension in the family as the family business is dwindling and young brothers blame the eldest one. Despite this, Dinanath's wife Sudha (Farida Jalal) manages to keep the family together. The family also consists of Mahesh and Savita's (Himani Shivpuri) arrogant MTV culture daughter Bela or "Bulbul" (Heena Qureshi) and a younger son Raju (Master Vishal Solanki) who is a polio victim. On the other hand there is Satish and his wife Ratna (Supriya Sachin), who have a mischievous six-year-old girl Pinky (Baby Vritika).For Dinanath's family, like any other Indian family, Shivani is just a motherless, emotional girl and they want to get her married and wash their hands off. But in the market of marriage, Shivani cannot present herself properly and is rejected by prospective grooms on one pretext or the other.

One evening Shivani is dressed up, waiting for a boy who was to see her. He never turns up. Shivani starts crying. Out of the blue, like a fresh breeze, a yound man called Sanju Shastri (Sanjay Dutt), claiming to be a distant relative's relative from America arrives. With his smart looks, witty jokes and vast knowledge on any subject, he impresses everybody in the family and wins their hearts. He is accompanied by a dog named "Babubhai". He talks to the dog and the dog, like a thinker, gives him answers. No one knows that this jovial, lovable, sweet talker is just facade of a shrewd and clever conman who is out to swindle the family after gaining their confidence. Sanju's personality brings about a magical change in the family. The two brothers think that if Shivani gets married into the wealthy Virani family, their business will flourish. Sanju accepts the task as a challange. Under Sanju's spell, Shivani blooms like a flower. Sanju teaches the nervous Shivani how to win over the heart of a boy and how to impress others. There is change in her personality. Now she transforms into a complete woman. She wins over the heart of the boy. Everybody is happy with this news but Shivani has different plans. She has developed a liking for Sanju. She plays the same tricks on Sanju once taught to her by him and Sanju is trappedin the love game. Even he has started to like Shivani but he is helpless because he wants to get the money and disappear.

When marriage date is fixed, Shivani refuses and there is tussle in the family. Shivani is unable to express her feelings for Sanju to her family members. Destiny plays such a game that if Shivani marries the Virani boy, it will save the family business. Seeing her father's condition, Shivani is shattered. To accept the marriage proposal is now Sanju's responsibility. Shivani plays her last card on Sanju by seducing him and bringing him closer to her.

Sanju is caught in Shivani's web. He reveals to Shivani his real identity. Shivani refuses to believe him as he is an angel to her who has given her a new life. Shivani has now confidence in herself that her choice of a boy can never go wrong. But will Sanju who is also in love with Shivani and at the same time greedy and in need of money, accept he to take the money and run away?