Dhanakpur village farmer Thakur Jaswant Singh (Alok Nath) and Dhanraj Singh (Dalip Tahil) are brothers. They have a younger sister Madhumati, who was impregnated and dumped by Ratan Singh (Arjun), the son of Thakur Raghuveer Singh from a rich Rajput family. The family refuses Jaswant Singh's request to get his sister married to Ratan and refuses Ratan's role in Madhu's current situation as they are interested in their status.

Insulted, Jaswant leaves the village. Unable to tolerate the events, Madhumati commits suicide. Frustrated, Dhanraj kills Ratan at his wedding and gets imprisoned. The two families are now bitter enemies. Jaswant moves to Delhi, develops his business, and reaches good status; he also raises Dhanraj's kids. Years later, Dhanraj gets released from the prison and receives a letter from his son, Raj (Aamir Khan), an ardent music lover, who completes his education in Rajput College. An emotional Dhanraj sneaks into Raj's college farewell party and is glad to see his son fulfill his dreams.

In a twist of fate, Raj and his cousin go to Dhanakpur to clear his family's land deal. While returning home, Raj falls for Rashmi (Juhi Chawla), a relative of Raghuveer Singh. Raj sneaks into Rashmi's birthday bash. The two meet again at a holiday spot. They become lost in the forest and fall in love while finding a way out. Raj finds out about Rashmi's family but is unable to tell her the truth. When Randhir Singh, Rashmi's father, finds out about the affair, he immediately arranges Rashmi's wedding to another man. The lovers take on their families and elope, dreaming of an idyllic life together.

Furious, Randhir hires a contract killer to target Raj. The lovers have a brief interval of happiness. They stay in a deserted fort, happy in their own paradise. When Randhir learns their whereabouts, he goes there to bring Rashmi home and ensure that Raj is killed. Randhir's mother does not wish for this so she goes to Dhanraj and tells him to save the love birds. Raj leaves the fort to bring firewood for their house. While Raj is away, Randhir meets Rashmi and tells her to come home, assuring her he has "accepted their love". Rashmi is overjoyed at her father's words, not knowing the truth. In the forest, Raj is chased by the henchmen.

Dhanraj reaches the fort and repeatedly asks about his son's whereabouts. They get in a fight and a gunshot is heard. Rashmi leaves the scene to make sure that Raj is okay. He is about to be shot but, on seeing Rashmi, the henchman shoots her instead. She is shot twice and rolls down the hill. Raj overpowers the henchman and reaches Rashmi's side, crying. They promise never to leave each other. On saying this, Rashmi breathes her last in Raj's arms. A grief-stricken Raj is devastated by Rashmi's death, and says that nothing can separate them. He commits suicide with a dagger given to him by Rashmi and dies with his head on her chest.

The final scene is both families running toward them; the lovers are together, never to be separated, as the sun sets behind them.

The film marked the directorial debut of Mansoor Khan, son of Nasir Hussain and his cousin Aamir Khan. The film was a tale of unrequited love and parental opposition, with Khan portraying Raj, a "clean-cut, wholesome boy-next-door". The plot was a modern-day take on classic tragic romance stories such as Layla and Majnun, Heer Ranjha, and Romeo and Juliet.

Mansoor recalled that his father Nasir wanted to launch Aamir as a leading actor and got convinced that Mansoor would direct the film after watching his telefilm. The film was initially titled Nafrat Ke Waaris before returning to original title.

For the film's marketing, Aamir Khan was involved in promoting the film. He set up an outdoor ad campaign, which was a faceless poster that said, “Who is Aamir Khan? Ask the girl next door.” With the help of his brother-in-law Raj Zutshi, Khan also went around putting up posters on auto-rickshaws across Mumbai.