A boy named Evan Taylor (Freddie Highmore) grows up an outcast in a home for boys, all the while believing that his parents are alive. He can hear music in everything: the light, the wind, the air. He believes that he can hear the music from his parents. He thinks that they always wanted him and would come and get him someday.
He meets a social service worker, Richard Jeffries (Terrence Howard), of the New York Child Services Department. Evan tells him he does not want to be adopted. Mr. Jeffries likes Evan and gives him his card. He wants Evan to confide in him if the need should ever arise.
Through a series of flashbacks, his parents are revealed to be named Lyla Novacek, (Keri Russell), a famous concert cellist, and Louis Connelly (Jonathan Rhys Meyers), an Irish guitarist and lead singer of a rock band. His parents met at the same party and spent the romantic night together. Due to Lyla's strict father, Lyla was unable to meet Louis where she'd agreed to and they parted, apparently never to see each other again.
From that one night together Lyla became pregnant with their child. Her father did not approve of this, he wanted Lyla to have a successful career without the obstacle of a child. After an argument with her father, Lyla ran out of a restaurant and was hit by a car. While in the hospital, she gave birth to a son. The last thing she was aware of was the nurses telling her that the baby's heartbeat was falling. She wakes. Her father tells her that her son died. Little did she know, her father forged her signature on the adoption papers. Her baby was fine. Both Louis and Lyla gave up their musical careers after losing each other, and neither was aware of their son's existence.
Evan has a very strong faith that if he could learn to play the music he will have a chance to be found by his parents. He believes that they will hear him. So he runs away to New York City. He meets Arthur, a boy who was playing the guitar on a street corner for money. He follows Arthur and is taken in by Maxwell Wallace, a.k.a. "Wizard" (Robin Williams), who houses various orphans and runaways, employing them to play music on the streets and taking a large cut of their tips. Evan immediately proves to be a musical child prodigy. Wizard enlists him and gives him the name "August Rush", convincing him he will be sent back to the orphanage if his real name is ever discovered.
Lyla discovers that her son is alive when her father, knowing that he is dying, confesses what actually happened. Lyla immediately sets out to New York to look for her now 12-year-old son. Meanwhile, she begins playing the cello again, having been called back to the New York Philharmonic. At about the same time, Louis reconciles with his bandmates.
After a raid by the police, Evan takes refuge in a church, where he again impresses with his natural musical talent and is enrolled at the Juilliard School as "August Rush." He proves to be an excellent student, better than the college students there, and a work he composes is chosen to be performed by the New York Philharmonic in Central Park. Unfortunately, Wizard barges into the dress-rehearsal and, after Wizard threatens to reveal Evan's real name, Evan reluctantly follows him back to his life of performing music on the streets.
Meanwhile, Lyla has discovered her son's name and has decided to stay in New York while searching for him. While there, she decides to resume her cello career. She is then chosen to play in the same concert, which features Evan's piece (under the name "August Rush"). Louis, being mistakenly told that Lyla has left on her honeymoon, also returns to New York to resume playing with his former band. He has a chance meeting with Evan in Washington Square Park and they play music together, although neither knows who the other is.
The night of the concert, Evan finally chooses to run from Wizard in favor of performing at his concert. In the meantime, Louis races to the park when he sees Evan's pseudonym along with Lyla's name on a sign billing the concert. Evan conducts his piece, and at its conclusion, when he turns around to see Lyla and Louis standing hand in hand, he knows that he is reunited with his mother and father at last.