Tenali is a comedy based movie in which, Panchabhootam (Delhi Ganesh) is a senior psychiatrist in Vizag. Kailash (Jayaram) is an upcoming psychiatrist. As Kailash takes over Panchabhootam over popularity.

Panchabhootam wants to ruin the happiness of Kailash by sending him the coward 'Tenali' as the patient. Since Kailash wanted to go for family vacation to Kodaikanal with his wife Jalaja (Devyani) and two kids, he asks Tenali to wait for a month so that he can begin the treatment after Kailash Vacation.

Panchabhootam, who wants to make the life of Kailash miserable, takes Tenali with him and travel to Kodaikanal. Meantime Janaki (Jyotika), the sister of Kailash joins the gang for vacation.

Kailash also invites Diamond Babu (a millionaire) so that Diamond Babu can get close to Janaki and marry her. As Kailash is trying to get away with Tenali, he gets closer to his family. And Janaki and Tenali becomes and inseparable and love each other.

Rest of the story is about how Kailash accept his sister marriage with Tenali.