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The villagers of Tenali are flocking to Lakshmiamma's house to attend the wedding of her son, Rama. Meanwhile, at Lakshmiamma's house, preparations are on in full swing for the wedding when Gunjappa, Rama's friend, notices that Rama is missing. Sharda, Rama's bride, and his lover, falls unconscious upon knowing the harsh truth. Soon, the villagers begin their search for the eloped bridegroom.

Sharda is annoyed at seeing Rama continue his merry ways and living a carefree life when everyone around him is in trouble. Sharda informs Rama that Gundappa's family will become homeless if they don't repay money to a notorious loan shark. Rama assures Sharda that he will devise a way to save Gundappa and his family.

Goddess Kali appears before Tenali Rama and asks him for his wish. Tenali Rama impresses Kali with his wit and walks away with his wishes fulfilled. Then, Tenali Rama arrives in the village and ties the knot with his lady love.

Tenali Rama travels to Vijayanagara with his family. Meanwhile, the king asks his nagar kotwal to catch the thief who has been troubling the people in the empire or he will lose his position. Tathacharya is furious to see Tenali Rama in the town, and he comes up with a plan to teach Rama a lesson. Will Rama be able to escape from the conspiracy against him?

Tathacharya buries Tenali Rama neck-deep in mud and curses him. He manages to trick a passerby and escape. When Tathacharya discovers that Tenali Rama has escaped, he devises a plan to capture him.

After Tenali Rama manages to escape, Tathacharya organizes a hunt for him and declares him a thief. He puts Rama's posters all over the village. But when Tenali sees the pictures, he replaces them with Tathacahrya's photo.

Tenali Rama tells Tathacharya that he will soon escape from the prison. He manipulates the kotwal and gathers the things he needs to escape from captivity. As Tathacharya visit's the prison to check out on Tenali Rama, he finds out that a fire has broken out and Rama is missing.

Tenali Rama traps Tathacharya and the kotwal in the prison and escapes. Furious by this act, Tathacharya demands a death sentence for Rama from the king. As the King asks to find Rama and present him before him, Rama appears in the court himself and pleads his innocence. What will the fate hold for Rama? Will the king punish him with death this time?

Tenali starts his investigation to find the real thief, and he starts by revisiting all the places of crime in order to look for clues. Tenali stumbles upon a few lines written by the thief and comes up with a plan. Although his mother urges him to run away from the kingdom, Tenali insists he will stay and see this through. What is his plan?

Tenali Rama visit's Sudhamini's house and is surprised to find Tathacharya. Sudhamini is shocked when she finds her jewels missing. At Krishnadevraya's court, Tenali appears and reveals that he has found out the real thief.

Tenali manages to prove his innocence and reveals that kotwal is the thief responsible for stealing Sudhamini's jewels. He tricks Tathacharya and forces him to confess to Krishnadevraya that he saw kotwal stealing from Sudhamini's house.

Tenali addresses kotwal as Mallu Deva in front of Krishnadevaraya and claims that he is the thief. Tenali gets abducted by a few men. He is shocked to find that Gopanna, kotwal's aide, is in fact Mallu Deva.

Tenali Rama partners with Gopanna aka Mallu Deva and visits Tathacahrya's house to steal. His foolish assistants reveal where the jewels are kept. When Tathacharya arrives, he is angry to see his precious things stolen, and finds a clue left behind.

Krishnadevaraya is impressed with Tenali Rama's wit and humour and officially appoints him as Vijaynagara's jester. However, Tathacharya is unhappy with the decision but is forced to abide by the king's order. Delighted, Tenali gears up to appear in Krishnadevaraya's court.

Tenali Rama is excited for his first day as the jester in Krishnadevaraya's court. While he looks for a seat, Tathacharya humiliates him and drags him to the entrance. But Rama uses his wit and manages to win against Tathacharya.

A lady comes to Krisnadevaraya's court and tries to con everyone by telling that she has a magical saree that is invisible. However, Tenali understands her ploy and decides to use her own trick against her. He pretends to have imaginary coins and manages to convince the lady to confess to her crime.

After being mocked by Tathacharya at Krishnadevaraya's court, Tenali Rama feels humiliated and decides to resign from his position as a jester. But he decides not to give up when he miraculously advises a little girl and learns about the importance of not giving up. Later, as Tenali gears up for his nuptials, his mother intervenes and stops him.

When Krishnadevaraya hears everyone gossiping about his soft corner for Tenali Rama, he decides to take his test. He disguises as a saint and visits Rama's house with his assistant. But when Tenali Rama takes good care of him, he is convinced about Rama's noble intentions. Meanwhile, Tenali Rama gets a hint that the man in disguise is in fact Krishnadevaraya.