Based on a novel by Katharine Leslie Moore, a wandering musician is adopted by a little girl who is trying to avoid a social worker who falls in love with the musician.
In prison on his way to the electric chair J. C. Hart (John Gallaudet) asks the warden to let him speak to Larry Poole (Bing Crosby) who is playing a lute. Hart thanks him for the music and gives him a letter to deliver to Smith in Middletown, New Jersey. Larry is a wayfarer and agrees to do so.
At a fair little Patsy Smith (Edith Fellows) is playing a toss game to win opera glasses. Larry shows her that the ring does not fit around them, and she persuades the man to give her the glasses to avoid bad publicity. Larry and Patsy get acquainted. He says he has been trying to find her. When she hears this, she runs away; but he stops her. She invites him to lunch. He offers to buy bread but has no money.
Larry plays the lute and sings “So Do I” near apartments, and Patsy dances. They pick up some coins and get a note to visit an apartment. When Susan Sprague (Madge Evans) answers the door, Patsy runs away. Larry goes in, and Susan sneezes and tells him she works for the country welfare department but cannot keep her in school. Larry says he is a troubadour. Susan says Patsy may be sent to an orphanage. Larry says he was raised in an orphanage, and he tells her to mind her own business. He says that is all he does for a living.
Gramp Smith is sitting outside playing chess. Patsy tells Larry the furniture does not belong to them, and they never pay rent. Gramp unwraps a ham. They see Susan coming and run off.
By a lake Gramp, Patsy, and Larry are having a picnic. Larry asks Gramp if he has heard of Hart. Gramp says he killed Patsy’s father. Larry hands him the letter. Gramp finds a key, and Larry reads the letter aloud. Hart wrote that he is sorry he killed Smith, and he left a house to his family. Gramp does not want it, but Larry persuades him to accept the offer.
On a hay wagon at night the three and the driver are singing “Old MacDonald Had a Farm,” and they make up new verses. They arrive at the house and are told that it is haunted. They hear thunder as they go in the dark house. Larry goes in and lights a lamp. Gramp and Patsy are scared but come in. Patsy in bed hears an owl. Gramp is playing chess, and Larry taps his pipe. Patsy calls to Larry, and he goes to her. She wants to go downstairs with him, and he carries her to a chair. He puts blankets on a couch and says her trouble is that she is a female. She says he is the first one to tuck her in bed. He says he is leaving in the morning, and she asks to go with him. She is afraid of ghosts, and to comfort her he sings “Pennies from Heaven.” She falls asleep.
In the morning Patsy defeats Larry in a chess game. She sees Susan coming and goes in the house. Susan tells Larry her job is to look after Patsy, and she calls him a hobo. He says a troubadour sings for his supper. Larry asks her to take the family off his hands so that he can go to Venice. She asks if he could support them. She asks if he is married, and he says no; he is sane. She gets angry and stalks off. Larry hears Patsy crying and goes in the house. She heard him say he does not want her and says she fell in love with him. He calls her a pest but gives her a handkerchief for her tears.
At the county welfare board Mr. Carmichael (William Stack) orders Susan to take the child to the orphanage in the morning. Larry comes into her office with Gramp and Patsy. They sit down, and Larry offers her a proposition. He says they want to be let alone. What does she want of them. Susan wants Patsy to be properly provided for without bad influences. Patsy starts to leave, but Larry makes her sit down or he will give up his idea. Larry says they are going to open a restaurant at the haunted house and sell chicken dinners with musical entertainment. Susan asks if they have capital. Gramp says they can start with two chickens that will multiply. Gramp says he will be getting $200 a month soon from the Townsend plan. Larry says he will get the capital, and he asks if she will leave them alone. She says she will be glad to.
By the house Patsy tries to catch the two chickens. Larry admires the sign painted for their restaurant but has no money to pay for it. He offers the painter chicken dinners. At the costume company Larry offers the manager 25% of the restaurant. At the electrical supplies company he gives a share to Mr. Arbuthnot. Outside his house Larry talks with the musician Henry (Louis Armstrong) who says they want 7% for the seven musicians.
While work is going on, Larry accepts a paid telegram. Susan asks for a reserved table for the opening. Henry tells Gramp that they have two hens and no rooster. Larry says they need fifty chickens, and Henry says his seven musicians can get seven chickens each. Larry offers them 14%, and they agree.
That night Henry sings “Skeleton in the Closet.” He is backed up by six other musicians, and customers at tables enjoy the show. Henry plays the trumpet while a person in a skeleton-suit dances. The waiter takes checks and learns that the customers are part owners and do not pay. Larry sings “Let’s Call a Heart a Heart,” and he goes over to Susan and sits down. She apologizes to him and commends his success. He asks if she will be satisfied if it pays off. She would be happy, but he says he wants to go to Venice. She asks if he was born in Venice, but he says he has never been there. She knows he was in prison, and he says he stowed away on a freighter that was a smuggling ship. He kisses her, and she asks why he did it. She is embarrassed by the audience, slaps him, and leaves. Another owner tears up a check, and the waiter tells Larry he is quitting. He says only Susan gave him a dime. The waiter leaves. Another man asks Larry if he has a license. Larry learns it costs $100 and says he will be there in the morning. Larry sees Patsy and tells her it is closing night because they have no money. Larry dances with Patsy. The sheriff and other men come in, and the musicians escape out the window.
At the tax office Larry asks for time and gets 24 hours. At the fair Crowbar Miller (Tom Dugan) hires Larry to do a death-defying trick twice a day for $60. Gramp gets a phone call from Larry inviting them to go to the fair. Gramp and Patsy go to the show. Larry comes out as Dare Devil Devlin, and Crowbar tells him he is to loop the loop. Crowbar introduces Devlin to the audience. Larry climbs a ladder and gets in the car. The car comes down and turns over in the air before crashing. Crowbar says he will pay the hospital bill.
Larry in a hospital bed is visited by Gramp, who says they took Patsy away.
Susan congratulates her boss Carmichael and complains that she was not allowed to be at the hearing for Patsy. He fires her, and she leaves.
Susan visits Patsy in her room at the orphanage and offers to be her friend. Patsy says Larry is her most intimate friend. Susan says she was fired for standing up for them. Patsy says Larry wants to be left alone. Susan says she likes Larry very much and Patsy too. They embrace.
Susan goes to the hospital room and reads a note from the departed Larry.
At the fair the orphanage children are enjoying a special show with clowns. Larry with his lute is wearing a mask. In her room the orphanage administrator invites Patsy to go to the show. Patsy says her heart is breaking. She will not leave the room. At the fair Larry sings “Pennies from Heaven.” On her bed Patsy prays and hears Larry singing. She runs out on a balcony and sees him. Larry sings “One Two Button Your Shoe” for the children. Larry embraces Patsy and says they are leaving. Patsy explains that Susan lost her job because of them. Larry makes her talk, and she says that Susan likes him very much. Larry tells her what they will do. Patsy gets inside a drum. A drummer leads a marching band. He puts the drum on a chariot, but it rolls off. Patsy comes out.
Police identify Larry Poole’s picture, and they call on Susan. She asks what the charges are. They asks her where he is, and she says he is in Venice.
In his room Larry is putting pins in a map of New York city, showing places where he has looked for Susan. Larry tells the maid that he is going to apologize to the girl and ask her to forgive him.
Larry sings “So Do I” while he is searching for her. Someone tosses a note with a nickel. He runs upstairs and knocks. Susan opens the door, and he hugs and kisses her. He tells her to slap him, but she says that is silly. She says she has been looking for him. She warns him the police are looking for him. A policeman is there.
Patsy tells a lady that she is on a hunger strike. Larry comes in, and Patsy hugs him. The woman says Patsy tried to set fire to the place. Patsy threatens to kill herself. Mr. Carmichael tells Larry he must help them because Patsy will not go with anyone but him. Larry says he will sue for false arrest, but they say he is not under arrest. Susan says Patsy should be adopted by a respectable, married couple. Susan, Larry, and Patsy leave together.
In a gondola Larry plays his lute and sings in Italian while sitting next to Susan. Gramp and Patsy are in the gondola too. Patsy is falling in the water, and Larry goes in the water too.
This musical depicts poor people during the Depression looking forward to the Townsend retirement plan (a forerunner of Social Security). The independent musician and child are kindred spirits and clash with the social worker who becomes liberated from her job and forms a family unit with the others.