Trevor McKinney is a young boy (Haley Joel Osment) from a dysfunctional family whose mother is an alcoholic. At school, his social studies teacher, Eugene Simonet (Kevin Spacey) challenges him to make the world a better place.
The boy comes up with the "pay it forward" concept (Karma.. sort of), in which you do a good deed for someone, who then does a good deed for three other people.
Rather than to "payback" your favour, you "pay it forward" to three other people so, ultimately, you would be doing people favours in advance - and that one favour would, eventually, reach the entire world?
Trevor starts his scheme by taking in a homeless junkie called Jerry (James Caviezel), much to the dismay of his Mother Arlene (Helen Hunt).
These efforts brings a revolution, not only to Trevor, but to his mother, Eugene and an ever-increasing circle of people affected by this concept, but who are unknown to Trevor himself.