DJay (Terrence Howard) is a pimp and drug dealer who is dissatisfied with his life. After acquiring a keyboard and reacquainting himself with an old friend from school, Key (Anthony Anderson), who has become a sound technician, DJay decides to try his hand at making hip hop songs.
Key and his sound-mixer friend Shelby (DJ Qualls) help DJay put together several “flow” songs. While DJay quickly proves to have a real talent for lyrics, in which he expresses the frustrations of a small-time hustler struggling to survive, it is his first fixed-length song, done at the urging of these friends, which most obviously has the chance of becoming a hit and getting local radio play.
The group experiences many setbacks throughout the creative process. DJay must hustle those around him in order to procure proper equipment and recording time, and Key’s relationship with his wife becomes strained. DJay throws out one of his prostitutes, Lexus, for ridiculing his art. DJay’s pregnant prostitute, Shug (Taraji P. Henson), joins in the creative process, singing hooks, and the group eventually records several fixed-length tracks, including “Whoop That Trick” and their primary single “It’s Hard Out Here for a Pimp”. After their first recording, DJay begins to show a romantic interest in Shug.
DJay’s friend, Arnel (Isaac Hayes), informs him that Skinny Black (Chris “Ludacris” Bridges), a successful Memphis rapper, will be returning to the neighborhood for a Fourth of July party. DJay gains admittance to the party under the pretext of providing marijuana, with the intention of giving Skinny Black his demo tape. Black is dismissive at first, but after a long night of reminiscing DJay successfully persuades him into taking the tape.
Before leaving the party, however, DJay discovers that the drunken Black has destroyed his tape, flushing it down the toilet. When DJay confronts Skinny Black, Black reveals that he never had any intention on helping DJay with his musical aspirations. In a fit of rage, DJay begins beating Skinny Black. During the confrontation Skinny Black manages to break the chain around DJays neck, which was a gift from Shug.
Black pulls out a gun, but DJay quickly disarms him and pistol whips him. DJay aims the gun at Black but suddenly comes to the realization of what he has done. While he attempts to resuscitate the unconscious Black, a member of Black’s crew enters the bathroom and quickly pulls out his gun, which results in DJay shooting him in the arm. DJay then resorts to using the guard as a human shield to make his escape.
DJay arrives home to find the police waiting for him. DJay turns himself in and tells Nola to keep his writing pad, with his rap lyrics. He tells her that “she is in charge” of getting his songs on local radio stations. While Shug tearfully watches DJay being led away in handcuffs, one of Black’s entourage takes advantage of his defenseless position to deliver a sucker punch. DJay is charged for assault and possession of a firearm and is sentenced to 11 months in prison.
While serving his time, DJay gets a visit from Key and learns that Nola (Taryn Manning) has hustled the local radio DJs into playing his songs, which have become local hits. When Key asks DJay if he really knew Skinny Black, DJay reveals that he made it up in order to keep the group’s dream alive. The film ends as we see a duo of prison guards who have their own rap group asking DJay to listen to their demo, much as DJay had approached Skinny Black. Djay accepts their tape and responds with: “You know what they say, everybody gotta have a dream”.