Local villagers notice the baby and rescue it. Sanga (Rohini) and her husband name the infant Sivudu and raise him as their own son. The villagers seal the staircase leading up the waterfall, fearing that someone may come to take away the child.
Sivudu (Prabhas) grows up to be a strong, adventurous young man who tries to climb the waterfall, with minimal success. After carrying a stone Shiva lingam to the waterfalls, he finds a wooden mask on the ground. Driven to find the owner of the mask, he attempts to climb the waterfall again and succeeds. After his ascent, Sivudu discovers that the mask belongs to Avantika (Tamannaah), a rebellious warrior of a group engaged in guerrilla warfare against Emperor Bhallaladeva (Rana Daggubati) of Mahismati. The group, led by Devasena's brother (Balireddy Pruthviraj), intends to rescue their former queen Devasena (Anushka Shetty) who has been imprisoned in the kingdom for the past twenty-five years.
Avantika falls in love with Sivudu after finding out that he climbed the waterfall for her. Sivudu pledges to help her in her mission and sneaks into Mahishmati to rescue Devasena. Sivudu rescues Devasena and flees with her, but is chased down by Bhallaladeva's son, Bhadra (Adivi Sesh) and the king's royal slave warrior Kattappa (Sathyaraj). After Sivudu beheads Bhadra, Kattappa drops his weapon, realizing that Sivudu is Mahendra Baahubali, the son of late king Amarendra Baahubali. Kattappa narrates the story of Amarendra's past.
Amarendra's mother had died giving birth to him, while his father had died long before that. His uncle Bijjaladeva (Nassar) was deemed unfit to rule due to his crooked nature, however he believes he was denied the throne due to the fact that one of his arms is disabled. Bijjaladeva's wife Sivagami assumed control of the kingdom with Kattappa's assistance until a new king could be selected. Amarendra Baahubali was brought up together with Bijjaladeva and Sivagami's son, his cousin Bhallaladeva. Both young men were trained in arts, science, disguise, politics, and warfare, but they had different approaches towards kingship. Amarendra Baahubali was gracious to everyone, and was loved by the people. Bhallaladeva was violent and achieved his goals by any means possible.
It was then discovered that Mahismathi was about to be attacked by an army of savages called Kalakeyas. Bijjaladeva proposed that the prince who killed Inkoshi, the king of Kalakeyas, would be the future king of Mahismati and the chief minister agrees.
During the battle, the Kalakeyas used a dirty tactic of using the prisoners of Mahismati as shields. Bhallaladeva plowed through the line of innocent prisoners with his chariot which had blades turning and killed them. Amarendra, on the other hand, caused them to fall down and attacked the Kalakeyas behind them, thus saving the prisoners. When it seems that Mahishmati would end up being defeated, Amarendra inspired his soldiers to fight back and they ended up crushing the enemy. While Amarendra defeated Inkoshi and was about to obey the words of Sivagami by chopping off his limbs, Bhallaladeva swung his weapon from a distance and killed him. Despite Bhallaladeva being the one to kill Inkoshi, Sivagami announced Amarendra Baahubali as the new emperor because of his courage and leadership and also because of the fact that he shielded and protected his own countrymen throughout the war.
After the flashback, when asked about Amarendra's current whereabouts, a tearful Kattappa reveals that Amarendra is dead, and that he is the one who killed him.