Abhiram and his friends, studying at an educational institute run by Srinivas, are preparing for an engineering entrance examination. They come across an old box of cassette tapes containing mathematics classes with a receipt accompanying it in the name of Kumar from Sozhavaram, dating back to 2000. After inquiry, they discover that Kumar is the district magistrate of Kadapa, and later, Kumar discloses that the man in the video is Balamurugan 'Bala'.

The plot moves back to 1993, when many private institutions sprang up and the government was finding it difficult to sustain interest in public institutions. Five years later, with government colleges shutting down due to a shortage of lecturers, the poor who cannot afford private institutions are left with little access to higher education. Srinivas, the president of the private colleges association, hatches a plan to adopt all the government colleges and send junior lecturers to those colleges, while obtaining support from the government to stop the regularization of fees by the government. Bala is one such lecturer, who is sent to a government junior college in Sozhavaram to teach mathematics. Bala finds that the college is lacking in attendance, and due to this, the college may be shut down soon.

Bala organizes a meeting with all the villagers and their children and explains the necessity of education, thus making the children and parents realize its importance. The students then start to come back to classes with Bala handling additional classes and engaging an ex-student, Muthu, to teach him as well. Meanwhile, Bala falls in love with Meenakshi, the biology teacher at the institution. Bala notices that there are caste differences among students and comes up with a plan to eliminate it. The final board exams take place, with all the students passing with first class distinction. Srinivas tries to lure Bala away with a lucrative job offer to stop students from moving back to government institutions rather than private institutions. Bala refuses, and Srinivas acts via the education minister to take back the positions offered to lecturers at government junior colleges and recruit new ones, leaving Bala without a job.

Later, Bala takes private classes in an open field in the village, prompting outbursts from Thirupathi, who instigates the villagers to drive him away from the village. Bala fights back but gets arrested and tortured in custody. He is dropped back into the village soon afterward, where the villagers are asked not to help him, indicating that he misused government funds. Bala's ex-students help him get back to his hometown, where he becomes dependent on his father, Narayanan, who works as a driver. After recovering, he takes up tutoring at his home on the insistence of Ansari, his former colleague, after many failed job interviews at private junior colleges. Meenakshi arrives and decides to marry him. They see a young boy who is willing to study but is unable to do so due to poverty. His father is constantly pressuring him to earn money.

Bala gets an idea and records his lectures using cassette tapes and sends them to Bhupathi, Abhiram's grandfather, a photographer in Sozhavaram. Bhupathi runs special shows for students at 6 p.m. every day in a nearby theater, where Bala's lectures are played. To clear doubts and interact with students, Bala visits the village, under the guise of a drama artist, each Sunday. Thirupathi tries to stop the students on the day of the exam. Bala fights them off and the students perform well, clearing the exams with Muthu scoring the first rank and revealing himself as Kumar. Thirupathi offers money to all the students, promising them sponsorship for their further studies on the condition that they endorse his institution. Bala asks the students to agree to it and asks them to help needy students in the future after they climb the socio-economic ladder.

In the present, Kumar continues his story, saying that the theater where they studied is now a coaching center for the underprivileged, developed by the old students, who take turns by teaching each year. While Kumar does not know the current whereabouts of Bala, it is shown that Bala and Meenakshi have opened a school, Ansari School of Knowledge, to provide free education for the underprivileged at Ooty.

In the end, Abhiram and his friends achieved ranks within the Top 100 in the JEE Mains examination, with Abhiram securing the first rank, guided by Kumar, the old students, and Bala's recorded tapes. At their felicitation ceremony, despite being coerced by Thirupathi, Abhi credits Bala for his achievement. In addition, he unveils Bala's tapes publicly, thus exposing Thirupathi.

In late July 2021, it was reported that Dhanush would collaborate with Venky Atluri for the latter's next directional before his project with Sekhar Kammula; the film marks Dhanush foraying into Telugu cinema for the first time. Sithara Entertainments were reported to fund the project.^[4] The company made a public announcement on 22 December confirming the project,^[5] while the title Vaathi and Sir was announced the day after. Atluri had recruited music composer G. V. Prakash Kumar, cinematographer Dinesh Krishnan and editor Navin Nooli.^[6] Samyuktha was announced as the lead actress the same day.^[7]

Principal photography began on 5 January 2022.^[8] The second schedule of the shoot began in April 2022 when Dhanush had joined the sets after he had finished the shoot of Naane Varuvean. The filming was completed in October 2022.^[9][10]

The music of the film is composed by G. V. Prakash Kumar. He won the National Film Awards for Best Music Direction for Tamil. The first single titled "Vaa Vaathi" in Tamil and "Mastaaru Mastaaru" in Telugu was released on 10 November 2022.^[11][12] The second single titled "Naadodi Mannan" in Tamil and "Banjara" in Telugu was released on 17 January 2023.^[13][14]

The film was scheduled for a theatrical release on 2 December 2022 in Tamil and Telugu, but was postponed.^[15][16] In November 2022, it was announced that the film will release on 17 February 2023.^[17] It was announced that Seven Screen Studio has acquired the distribution rights of the film in Tamil Nadu.^[18]

Initially, there were reports suggesting that the film's streaming rights were acquired by Aha, but were later acquired by Netflix, while the satellite rights were acquired by Sun TV Network.^[19] It began streaming on Netflix from 17 March 2023 in Tamil, Telugu, and Hindi.^[20]

Vaathi received mixed reviews from critics.^[21] On the review aggregator website Rotten Tomatoes, 67% of 6 critics' reviews are positive, with an average rating of 6/10.

Logesh Balachandran of The Times of India rated the film 3 out of 5 stars and wrote "Vaathi is a film that's mounted on no-nonsense writing though it could have been even better".^[22] Latha Srinivasan of India Today rated the film 2.5 out of 5 and said that the film has a "noble mission" but Venky Atluri's story and narration are a big let-down.^[23] Avinash Ramachandran of The New Indian Express rated the film 2.5 out of 5 stars and wrote "Despite using a 140-minute runtime to teach us a bunch of subjects, but the film teaches us are "Films don't have to be preachy to drive home a point" and "Dhanush can make anything look easy".^[24] Anandu Suresh of The Indian Express rated the film 1.5 out of 5 stars and termed the film as Dhanush starrer about right to education fares poorly.^[25] Bharathy Singaravel of The News Minute rated the film 1 out of 5 stars and wrote "A film of such mediocrity and confused politics".^[26]

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