In ancient Baghdad, Hafiz, the so-called "king of the beggars," spends his days performing magic tricks for wealthy men and coaxing them out of their money, and his nights posing as the Prince of Hassir in the city's colorful taverns.  Hafiz' beautiful daughter Marsinah is his pride and joy, and as he has vowed that she will marry a prince, he has built a high wall around their house and forbidden her to go out on her own.

One night, while wearing his princely guise, Hafiz meets the Caliph, the new ruler of Arabia, who is posing as the carousing son of the royal gardener.  Unaware of the Caliph's identity, Hafiz insults the new king and calls him a "yahoo."  Hafiz then receives a message from his secret lover Jamilla, and rushes to meet her, unaware that she is the Grand Vizier's palace queen.  Although the bored Jamilla knows that Hafiz is a liar, she nonetheless enjoys his charm and encourages his attentions.

While Hafiz romances Jamilla, the Caliph, still posing as a peasant, makes love to Marsinah, who has escaped from her father's "prison."  The Caliph is so entranced by Marsinah that as soon as he returns to his palace, he announces to his advisor, Agha, that he is marrying her the next day.  The Caliph also makes arrangements for the Grand Vizier to be tried the next day for corruption.

The next morning, Hafiz, who has suddenly become aware that his love struck daughter is all but grown, mopes around the marketplace, despondent because he has found no princely prospects for her.  Hafiz' sad contemplations are interrupted by the attempted assassination of the Caliph, who has been targeted by the powerful, ambitious Grand Vizier.  After witnessing the Grand Vizier's quick execution of the failed assassin, Hafiz determines to make Marsinah the Grand Vizier's new queen.

To that end, Hafiz uses his magic skills to steal some clothes from the royal merchants, then tricks the Grand Vizier's own guards into securing an elephant for his "royal" transport.  Presenting himself at the Grand Vizier's court as the newly arrived Prince of Hassir, Hafiz quickly ingratiates himself with the ruler.  When Hafiz boldly denigrates the Grand Vizier's dancing girls, the Grand Vizier begs Jamilla, who was given to him as part of a political deal, to dance for his guest.  Jamilla at first refuses, but upon learning that the guest is her lover, the Prince of Hassir, she performs her most seductive dance.  During a private moment, Hafiz reassures Jamilla that he is still a rogue and pledges to free her that night.  Hafiz then convinces the Grand Vizier to grant Marsinah, his "princess," an audience.  As Hafiz is telling a stunned Marsinah about the Grand Vizier, however, police arrive at his house and arrest him for robbery.

Hafiz is dragged back to the Grand Vizier, who laughingly orders that the impostor's hands be chopped off.  Just before the blow is delivered, however, the Grand Vizier learns that his palace has been surrounded by the Caliph's soldiers.  The Grand Vizier is then ordered to appear before the Caliph in open court.  Seeing his opportunity, the still-bound Hafiz shouts out that he can help the Grand Vizier defeat his enemy, then agrees to assassinate the Caliph on condition that the Grand Vizier makes Marsinah his new queen.

Hafiz rushes home to tell Marsinah the good news, but Marsinah refuses the marriage, declaring that she loves another.  Ignoring her tears, Hafiz commands Marsinah to go to the Grand Vizier, who upon seeing her, orders Jamilla to step down as Queen.  Jamilla fights her dethronement until she realizes Hafiz is behind it and assumes he is acting on her behalf.  As planned, Hafiz then goes with the Grand Vizier to open court and auditions to be the Caliph's royal magician.

While Hafiz performs his magic, the Caliph realizes he is Marsinah's father, but before he can embrace him as his future in-law, Hafiz hurls a knife at him.  The knife misses its mark, and Hafiz is immediately seized, but after hearing the Caliph announce that he is going to marry Marsinah, Hafiz escapes.

Hafiz rushes to the Grand Vizier's palace to free Marsinah, who has since revealed to Jamilla her father's true identity, but is challenged by the Grand Vizier.  After a fierce fight, Hafiz finally kills the Grand Vizier and is then recaptured by the Caliph.  As punishment, the Caliph pronounces Hafiz the new prince of Hassir and orders him to leave for the remote region at sunset.  The Caliph then pulls down Hafiz' wall and carries a thrilled Marsinah off to her royal wedding.  As the happy young couple parades through the streets of Baghdad, Hafiz and his new bride, Jamilla, set off for life in Hassir, content that "kismet," or fate, has at last been kind to them.