A 12-year-old schoolboy in Las Vegas, Nevada named Trevor McKinney (Haley Joel Osment) is given a class project to complete by his social studies teacher Eugene Simonet (Kevin Spacey), a man with terrible burn scars on his face and neck. His task is to come up with a plan that will change the world through direct action. On his way home from school later that day, Trevor notices a homeless man, Jerry (James Caviezel) and decides to make a difference in Jerry's life. Trevor then comes up with the plan to "pay it forward" by doing a good deed for three people who must in turn each do good deeds for three other people, creating a charitable pyramid scheme. Trevor's plan is to help Jerry by feeding and housing him so he can "get on his feet."
The next morning, Trevor's mother, Arlene McKinney (Helen Hunt), a single mother recovering from alcoholism, becomes angry with Trevor after finding Jerry in their house. She then accuses and confronts Eugene at the school about the reason Trevor has allowed Jerry into their home. Eugene is also intrigued by Trevor's response to the social studies project.
Later that night back at their home, Trevor confronts his mother about her alcoholism, and in a fit of anger she slaps him across the face. Trevor runs away from home, and Arlene asks Eugene to help her find him. They find Trevor at a bus station, about to be molested. Trevor and Arlene embrace in relief after Arlene apologizes profusely.
Meanwhile, Chris (Jay Mohr), a journalist, is trying to find out why a total stranger gave him a brand new Jaguar S-Type car after Chris' old 1965 Ford Mustang was damaged in a car accident. The stranger's only explanation is that he is simply "paying it forward". When Chris asks him for more information, the man explains that, when he recently visited a hospital while his daughter was suffering an asthma attack, a gang member suffering from a stab wound actually took up a gun to force the doctors to look at the man's daughter before she collapsed, prompting Chris to begin his search again.
After Trevor's apparently unsuccessful attempt to help Jerry, he decides to help Eugene by setting him up with Arlene, Trevor's own mother. Their relationship grows in strength until Arlene's ex-husband, Ricky (Jon Bon Jovi), who claims he has "changed" and has quit drinking, shows up unannounced and Arlene decides to give him another chance.
When Arlene later tries to explain her choice to Eugene, the audience learns how Eugene's burns were the result of terrible child abuse by his father. Eugene is concerned not just about the abusive and violent nature of Trevor's father, but that the simple absence of a loving father is detrimental to Trevor's well-being. He explains that his father was always abusive of him and his mother always took him back. At thirteen, Eugene ran away from home and returned home when he was 16, asking his mother to come with him but his father knocked him out and proceeded to burn him, resulting in a number of scars on his chest. Arlene feels that she must nevertheless give her ex-husband another chance, but shortly thereafter he becomes angry and violent and it appears that he has not in fact stopped drinking alcohol. Arlene realizes what a terrible mistake she has made. She feels that Eugene will never take her back, and Eugene for his part is not prepared to rekindle the relationship.
At around this point, Jerry, who has moved on to another city, discovers a woman about to commit suicide by jumping off a bridge; even when she throws her purse at him and yells at him to get away, Jerry simply talks gently to her, encouraging her to come down and talk to him about her problems. Meanwhile, Chris discovers the gang member who helped the man's daughter, who reveals that he was brought into the 'pay it forward' movement when he was rescued from the police by a homeless woman in a car. Having located the woman (played by Angie Dickinson), she tells Chris that she herself was given the idea by her daughter--who turns out to be Arlene.
Arlene seeks out her mother, Grace, whom she has not seen in three years. She says she wishes to say something to her and gives her mother the gift that enables Grace to have faith that she can become sober for a few days, long enough to visit the family and see her grandson: Arlene tells her mother that she forgives her for everything.
Chris finally identifies Trevor as the originator of "pay it forward," and conducts a recorded interview at the school. Trevor explains his hopes for the concept, but voices his concerns that people may be too afraid to change their own lives in order to make the whole world a better place. Eugene and Arlene are both present during the interview. When Eugene hears Trevor's words, he realizes that he and Arlene should be together.
As Eugene and Arlene reconcile with a passionate embrace, they hear shouts and scuffling outside. Trevor has come to the defense of a friend who is being attacked by bullies, and is trying to fight them off, although they are older and bigger. As Eugene and Arlene run down to stop the fight, the main bully who is a gangster-like boy impulsively pulls out a knife. Trevor is pushed onto the boy with the knife and is thus inadvertently stabbed in the abdomen. Trevor is rushed to hospital, where he dies from the stabbing.
Terribly distraught, Arlene and Eugene are later watching a television news report about "pay it forward" and Trevor's death, and learn that the movement has grown nationwide. Venturing outside, they see hundreds of people gathering in a vigil to pay their respects to Trevor, with yet more people arriving in a stream of vehicles visible in the distance as the movie ends.
(Source: WikiPedia. Bangs_McCoy)