Ishaqzaade depicts the passionate love story of two defiant, rebellious individuals. The Chauhans and the Qureshis are two political families whose rivalry and mutual hatred for one another goes back generations. Parma (Arjun Kapoor) is a good-for-nothing local enforcer, grandson of the patriarch chauvinist, Grandfather Chauhan, who often takes digs at Parma for being the useless son of his widowed daughter-in-law. This makes Parma try to prove himself worthy. Zoya (Parineeti Chopra) a Muslim who offers Namaz five times a day, is the trigger-happy, hot-tempered only daughter in a traditional Muslim house full of brothers, along with her parents. She desires to go into politics like her father, but this dream is constantly laughed at by her family.

When the local elections take place, Parma and Zoya's canvassing efforts lead to a clash between them, which ends up with Parma being slapped across the face by Zoya. While Parma is enamored by Zoya's fearlessness, Zoya is intrigued by his raw charm (including his inability to properly pronounce her name, instead calling her "joya" instead of the proper "Zoya"). They fall in love after an incident when parma enters female bathroom to find zoya and elope; Parma converts to Islam and changes his name to Pervez. After marriage, Parma makes love to Zoya, and reveals that he tricked her into marrying him. He defiled her to take revenge against her clan and the humiliation she caused him by slapping him when he misbehaved with her. Zoya is left heartbroken and devastated as Parma joins his family in a celebration of "becoming a man". Zoya invades to shoot Parma but is intercepted by his mother, Parvati, who urges her to calm down. In the heat of the moment, Grandfather Chauhan shoots Parma's mother when she tries to defend her son and daughter-in-law from the bloodthirsty families. Parma realizes his mistake and protects Zoya from being murdered by his family.

Parma and Zoya go on the run from their murderous families and take refuge in a brothel. At first, Zoya is still furious with Parma for his deception and even believes that he was trying to sell her to the brothel. She attacks him with a piece of broken glass, cutting his arms badly. The brothel Madame allows them to stay while Parma recovers and Zoya begrudgingly nurses him. He asks her for forgiveness and though she refuses to grant it, showing that she still loves him through little actions of affection. However, their mutual grief soon brings them together, giving their love a second chance. The two renew their marriage vows in a proper ceremony at the brothel. Zoya decides to try reconciling with her family, and takes Parma to her home to win over her father. They are instead met with hostility and gunshots when Zoya's father puts a gun to her head, threatening to kill his own daughter.

The couple flee as Zoya's father sends his men after them. Zoya and Parma prepare to run away to Jaipur, but when Parma leaves the safety of the bus to get water, their pursuers spot him and seize Zoya. She breaks free as Parma furiously fights to save her. They are reunited briefly, but quickly are found by Parma's former friends and run to the college, closed for Eid. The two rival families decide that Parma and Zoya's marriage is a stab to their respective religious communities and political careers; they decide to kill the lovebirds by joining forces.

Parma and Zoya take refuge on a terrace, engaging in a gunfire battle. With only a few bullets left, Zoya realises that they are outnumbered. She asks Parma to shoot her so that their love can win and they can die in the victory of their love, rather than be riddled with bullets by their own families, and allow hatred to win. The two shoot each other in the abdomen willingly and die in each other's arms, smiling. The goons check if they are dead and go inform the two families, who leave satisfied. The movie ends with Parma and Zoya's bodies lying on the terrace, and an on-screen message that explains how thousands of lovers like them are killed every year only because of falling in love outside their caste and/or religion.