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A century ago there was an evil demon Damyaan. He was granted a wish to be immortal by the Book of Magi. But along with that boon, he was also given a curse that he would be confined to the City of Sonapur. The film starts in Dholakpur, where the friends (Bheem, Jaggu, Bholu, Dholu, Raju, Chutki & Kalia) of Chhota Bheem are planning his secret birthday party. Now Damyaan wants to escape from this confinement and get back his power and kingdom. His minister Skandi meets King Indravarma, tells him about the hidden treasures of Sonapur and thus lures him. The king agrees to go to the city in search of that hidden treasure. Despite of being warned by the gypsies, he starts his journey along with Chhota Bheem and his friends. After reaching the city, the king unknowingly sets the demon free. The demon captures the king, Chhota Bheem and his friends in a prison. Bheem meets Santrik, who tells him that the only way to get himself and his associates free from Damyaan's capture is defeating the demon and the demon can be destroyed only with the Book of Magi.Then Santrik sends them back in time where the kaalsainiks-the henchmen of Damyaan-figure out that they are not from Sonapur.A fight ensues, and in the process, Dholu and Bholu are turned into frogs.Bheem somehow manages to defeat them and dons their clothes along with his friends and enters sonapur pretending as a bunch of Kaalsainiks. Soon another group of kaalsainiks arrive and a sweet shop owner named Gulabchand figures out that they are not kaalsainiks and manages to save the group. In the process Bheem is badly wounded and faints while passing through the magical door. Upon being brought into wakefulness, he observes that Dholu and Bholu have regained their respective human forms. The sage who saves them tells them that despite being brave and strong, they cannot defeat damyaan without magic and teaches the group magic. After completing their class on magic, he provides them with respective powers- Raju gets a magical bow and arrow which never misses its aim, Chutki gets two magical trees, Jaggu a bunch of magical stinging bananas, Kaalia the power to get invisible, Dholu and Bholu the power to multiply into a hundred Dholus and Bholus while bheem gets an almost impossible hymn to seize the power of the enemy which was not decoded till date.At night they hear sounds of celebrations, which are of the end of the second term of Damyaan's kaalkriya, which involves trapping ghosts for their powers in three different rings in three terms by using the hymns given the book of magi.Bheem and his team are teleported to Damyaan`s castle.Using their respective powers, manage to seize the first ring, but while seizing the second ring kaalia activates a trap which covers them in a strange gas.Upon recovering, Bheem comes to know that they are captured by Damyaan. Damyaan tells him that in an hour it will be his birthday and that he has decided to give him a "birthday gift"-watching his friends die. On an instant bheem decodes the hymn and releases his friends. They fight and defeat the kaalsainiks while Bheem challenges Damyaan to fight without magic. Damyaan then transforms into his powerless form, a naag with an ambition of ruling the world.Bheem eventually beats up Damyaan in his trademark "jump and kick and punch" style and eventually destroyes him and all the existing kaalsainiks.On his birthday,the sage, who is the rightfull king of sonapur, decides to proclaim Bheem as the next king while bheem refuses, saying that "I am not the prince of Sonapur, but Bheem of dholakpur" while Raju comments on the dialogue saying that it is "a real hero's talk". Then Bheem and his team return to the future to Dholakpur, only to realise that the whole of Dholakpur has fixed a grand party for it's hero, Chhota Bheem.