Pollyanna (Hayley Mills) is the orphaned daughter of missionaries who arrives in the small town of Harrington to live with her rich aunt, Polly Harrington (Jane Wyman). Pollyanna is a cheerful youngster who focuses on the goodness of life and, in doing so, makes a wide variety of friends in the community including the hypochondriac Mrs. Snow (Agnes Moorehead) and the acidic recluse Mr. Pendergast (Adolphe Menjou).
Aunt Polly's wealth controls the town, and, when Harrington citizens want a derelict orphanage razed and rebuilt, Aunt Polly opposes the idea. The townspeople defy her by planning a carnival to raise funds for a new structure. Aunt Polly is furious with their audacity and forbids Pollyanna to participate. On the evening of the carnival however, Pollyanna is coaxed out of the house by playmate Jimmy Bean (Kevin Corcoran), who reminds Pollyanna she is leading "America, the Beautiful" at the highpoint of the event. With misgivings, Pollyanna slips away and has a wonderful time at the carnival.
On returning home, she avoids her aunt's presence by climbing a tree to her attic bedroom. She falls and is severely injured, losing the use of her legs. Pollyanna's spirits sink with the calamity, jeopardzing her chances of recovery. When the townspeople learn of Pollyanna's accident, they gather en masse in Aunt Polly's house with outpourings of love. Pollyanna's spirits gradually return to their usual hopefulness and love of life. She departs Harrington with her aunt for an operation in Baltimore that, it is hoped will correct her disability. The film ends at this point. It is never made clear whether or not she recovers the use of her legs.
Subplots include one concerning the return of Aunt Polly's girlhood sweetheart Edmund Chilton (Richard Egan) to the town; another, the town's minister Reverend Ford (Karl Malden) freeing himself from Aunt Polly's dictates; and another, the union of Aunt Polly's maid (Nancy Olson) with her sweetheart (James Drury).
Secondary roles are filled by a host of veteran film and television performers. Servants in Aunt Polly's home include Reta Shaw as cook Tillie Lagerlof and Mary Grace Canfield as the sour upstairs maid Angelica. Leora Dana plays Reverend Ford's wife, and Gage Clarke plays the mortician Mr. Murg. Townspeople include Donald Crisp as Mayor Karl Warren, Edward Platt and Anne Seymour as Ben and Amelia Tarbell. Ian Wolfe plays Mr. Neely and Nolan Leary portrays Mr. Thomas. Director David Swift plays a fireman in an early scene.
Although the original book had a sequel, such was not the case for the film.