Picking up from the the first part, Danish Khan murders the captured gunman involved in his father''s assassination, Sardar Khan. Sardar''s second wife, Durga, is now a maid in Ramadir Singh''s (Tigmanshu Dhulia) household. Danish and Asgar attempt to convince Faizal (Nawazuddin Siddiqui) that his friend Fazlu was the mole who spied for the Qureshis. Danish, in order to get a smaller jail sentence, surrenders to the police in a concocted case of thievery. After the court hearing, however, he is assassinated by Sultan Qureshi. A stoned and oblivious Faizal, returns home to the funeral of his dead brother. He gets in a conversation between Nagma (Richa Chadda) and Farhan where she identifies Faizal as a terminal junkie incapable of exacting revenge for the family.
Fazlu becomes a politician and wins Wasseypur''s local elections. Faizal goes to congratulate him but by the end of the day brutally murders him instead. After Fazlu''s gruesome murder, Faizal takes over as the new head of the crime syndicate. With the help of an ambitious but fraudulent small time businessman, Shamshad Alam, he attempts to expand his business interests.
Faizal Khan and Ramadhir Singh meet and discuss the circumstances which led to the blood feud. Ramadhir gives his consent to Faizal to retaliate against Sultan Qureshi under the condition that the Khan-Singh feud come to an end. After Faizal and Mohsina''s (Huma Qureshi]) marriage, Faizal kills Sultan''s men who were involved in the murder of his father and his brother. Sultan, still oblivious of the truce between the Singhs and the Khans, calls Ramadhir, asking for permission to retaliate.
A 14-yr-old Perpendicular Khan robs local stores on the pretext of being Faizal''s brother. An opportunistic Definite Khan (Zeishan Quadri), Faizal''s stepbrother, also a nuisance to the public, aspires to become a gangster. Though being brought up in Ramadhir Singh''s household, he grows to idolize Faizal and thus double-crosses Singh. At the instigation of local shopkeepers, Perpendicular Khan is murdered by Sultan Qureshi. At the same time, Shamshad Alam, on being caught short-changing Faizal, rats on Faizal''s illegal operation to the police and gets him arrested. Definite Khan in order to gain Faizal''s appreciation, attacks Shamshad Alam, grievously injuring him. Faizal, however, comes under the sway of Ikhlakh who, unknown to him, is Ramadhir Singh''s mole; and in his greed for money, ignores Definite who eventually grows estranged from him. Faizal decides to join politics and contest a rigged election against Ramadhir Singh.
After Faizal''s release, Sultan in a last-ditch effort, arranges an ambush on the Khan mansion to eliminate Faizal and his whole family (the opening scene of Part 1) but everyone escapes unharmed. Enraged at their failure, during the festivities of Muharram, Sultan''s henchman brutally kill Asghar and Nagma at the marketplace, leaving Faizal blind with rage. With Definite''s help, Sul