The story takes place "when old Baghdad was new and shiny", in an Arabian Nights atmosphere. Colman plays Hafiz, a middle-aged beggar and magician who parades about as the King of Beggars during the day, and as the Prince of Hassir during the night. As the Prince of Hassir he meets Lady Jamilla, the Queen of the Grand Vizier's harem, who knows he is a poseur but is fascinated by him. Meanwhile, the young Caliph disguises himself as the "son of the Royal Gardener", and roams the streets of Baghdad to learn about his subjects firsthand, despite the disapproval of his trusted adviser Agha. During his sojourns, he meets and falls in love with Marsinah, Hafiz's daughter. Unknowingly on another sojourn, he meets the "Prince of Hassir" and is amused by his magic tricks, specifically the one where Hafiz draws a knife from handkerchiefs. Determined to make a "world of dreams" for his daughter Marsinah, Hafiz has built high walls around his house, so as to raise her up on fairy tales and the promise she will marry royalty. Marsinah's nurse, Karsha, growls "Bah!" every time Hafiz gets expansive about the future. She knows Marsinah has fallen in love with a "gardener's son", but keeps it from Hafiz. Marsinah tells her suitor about Hafiz' promise of a "prince who will batter the walls down". The Caliph returns to his palace, planning to propose and marry Marsinah. The next day, Hafiz witnesses an attempt on the Caliph's life by an agent of the Grand Vizier. The Vizier kills the would-be assassin before he can be caught and questioned, as the Caliph suggested, and ever more so, the Caliph suspects him of being behind the plot. Although he knows the Caliph is unmarried, Hafiz decides the Vizier is good enough for his daughter, for he might be Caliph himself soon. Stealing fancy clothes from the market, Hafiz talks his way into the Vizier's presence as the Prince of Hassir and offers him Marsinah's hand in marriage. The Vizier plies Hafiz with wine and food and shows off his dancing girls. A reluctant Jamilla only agrees to perform when she realizes the guest is her false Prince of Hassir. In a private moment, Hafiz asks Jamilla to leave the Vizier and marry him, and she agrees. While Marsinah will take her place as Queen of the Harem and be the wife of the Grand Vizier. Returning home, Hafiz tells his daughter to prepare for her wedding day; Marsinah is despondent of this, and then resigns herself to her kismet. Then Hafiz is arrested for theft of those fancy clothes and is brought before the amused Vizier. He is sentenced to have his hands cut off, but before the sentence can be carried out, a messenger ominously summons the Vizier to appear before the Caliph. To ensure his obedience, the Vizier's palace is surrounded by the Caliph's soldiers. Hafiz bargains with the Vizier for his hands and life, and for his daughter, Marsinah, to become the new Queen of the Harem and the wife of the Grand Vizier. This bargain is to be sealed, with Hafiz offering to kill the Caliph by using his magic and shows the Grand Vizier his trick of drawing a knife from handkerchiefs and throws it, expertly, to its mark. Hafiz, with help of the Grand Vizier's office, is arranged to meet with the Caliph at a public open air audience. The plan is suspected when the Caliph is told by his officers about the source of the petition. This is further complicated when the Caliph's officials at the last moment notify him that Hafiz is none other, the man he has been searching for all along to ask for Marsinah's hand in marriage. Hafiz, unaware that the Caliph is the very same young man whom he showed his knife trick and is the man that his daughter is in love with, wangle's his way closer to the Caliph so that he can do the trick and assassinate the Caliph. The Caliph, knowing full well what to expect, leans out of the way of the thrown knife. In the confusion, the Vizier escapes and orders that Marsinah to be killed. Hafiz, knowing all too well what his failure means, rushes to Marsinah to save her. In the harem, Hafiz and the Grand Vizier fight it out, with the Grand Vizier being killed. At this point the palace guards arrive and arrest Hafiz. As punishment, the Caliph makes Hafiz a Prince of the desolate and barren region of Hassir. Hafiz, now truly the Prince of Hassir, is ordered out of Baghdad by sunset that evening or else. Prince Hassir, agrees and asks only that the Caliph, when he seeks his daughter as his wife, tear down the walls of his home, thus fulfilling the dreams that he always told his daughter of her kismet. The Caliph orders his men to tear down the walls of Hafiz's house, and rides in on his white horse; Marsinah with Jamilla by her side, is told that the man she recognizes as the gardener's son is really the Caliph, and the lovers are united. Though Hafiz, now the Prince of Hassir, is exiled from Baghdad for life, he sees his beloved daughter will be wedded to the Caliph, and with Jamilla by his side, they leave Baghdad for Hassir, together, thus fulfilling his kismet too.
