Balasubramanian alias Balu (Rajinikanth) is an absent-minded but kind-hearted Tamil college Professor. He lives with his younger brother Raju (Prabhu), his maternal uncle (V. K. Ramaswamy) and his daughter Sumathi (Suhasini) who is also love interest. Raju, who studies in the same college that Balu works, is short-tempered, rowdyish and a drunkard, spoiled by Balu's and Sumathi's pamperings. He frequently gets into fights with a fellow student Raghupathy (Nassar), whose father owns the college. Balu fails in several attempts to reform Raju. One night, Balu is accidentally killed when he tries to intervene in one of the fights between Raju and Raghupathy. Before dying, Balu asks Raju to ensure that he can find another person who can marry Sumathi as he does not want her to suffer after his death, to which Raju agrees with a heavy heart. Balu's demise marks a turning point for Raju, who vows never to get angry and drink again. Sumathi, who is devastated at Balu's death, goes into depression, dons the garb of a widow and vows never to marry. To ensure that Sumathi gets over Balu, Raju and Sumathi move to Bangalore, where Raju takes up a job at a garage owned by Devi (Kushboo).

One day, Raju encounters his brother's doppelgänger Shankar (Rajinikanth), a rowdy and thief who steals cars daily from the garage. Raju, who still feels guilty over his brother's death, is unable to fight Shankar as he looks like his brother and unsuccessfully tries to develop a bond with him. However, after hearing Raju's and Sumathi's sad story, Shankar undergoes a change of heart and he decides to mend his ways, eventually becoming a police informer. Soon, he falls in love with Sumathi, but Sumathi rebuffs him as she is unable to forget Balu. Meanwhile, Sumathi is kidnapped by a smuggler Bhaskar (Captain Raju), for whom Shankar once used to work, in order to force him to smuggle diamonds. Shankar reluctantly agrees to Bhaskar's demand so that Sumathi would be saved, but when Bhaskar refuses to release Sumathi, a fight ensues between Shankar and Raju on one side and Bhaskar on the other side, which ends with Bhaskar's arrest. Sumathi realises her love for Shankar, and the movie ends with the marriages of both Shankar and Sumathi as well as Raju and Devi, with Shankar dressing up like the late Balu for the marriage.

• Rajinikanth as Balasubramanian "Balu" and Shankar
• Suhasini as Sumathi
• Prabhu as Raju
• Kushboo as Devi
• Nassar as Raghupathy
• Captain Raju as Bhaskar
• V. K. Ramaswamy as Sumathi's father
• Charle as Shankar's friend
• V. Gopalakrishnan
• MRK

After Thai Veedu, Devar Films parted ways with Rajini. All the subsequent films they produced were flops which resulted in heavy losses. Director R. Thyagarajan openly accepted that they had a very good rapport with Rajini for sometime but due to unavoidable circumstances they lost their friendship with Rajini. They accepted that they are responsible for the issue and there's no mistake on Rajini side. Rajini wished to help them and did Dharmathin Thalaivan under Dandayudhapani Films banner. Dharmathin Thalaivan was the 21st collaboration between Rajinikanth and SP Muthuraman. The film saw Prabhu and Rajini pairing for second time after Guru Sishyan (1988). The film marked the debut of actress Kushboo in Tamil films. Kushboo revealed that the film happened "after I met Prabhu at a studio and he recommended my name to the producer" and she also recalled an instance when she struggled to learn and understand Tamil during the shoot.

The music composed by Ilaiyaraaja. The song "Thenmadurai" remains one of the famous songs from the film.^[7] The song "Muthamizh Kaviye" is based on Gaurimanohari Raga.^[8]

Dharmathin Thalaivan became a super hit and paid off all the losses of Devar.^[1] However it became the final production of Devar films and after that they left the industry.^[9] Indiaglitz wrote: "There was another side to our own Superstar and Dharmathin Thalaivan was a fine example for the same. He did the role of a passionate Tamil teacher with his usual swag".^[10]