This sentimental story about the loving grandson of an English aristocrat and son of an American mother was based on the 1886 novel by Frances Hodgson Burnett.
In Brooklyn Ceddie's father dies, and Ceddie (Freddie Bartholomew) gets a bicycle from his mother Dearest Erroll (Dolores Costello). A bully and others fight Ceddie, but his friend Dick (Mickey Rooney) helps him. The grocer Hobbs (Guy Kibbee) gives them soda-pop. Havisham (Henry Stephenson) tells Erroll that Ceddie will go to his grandfather, the Earl of Dorincourt; but she can't see him, because he dislikes Americans. Ceddie tells Hobbs that he is going to be an earl. Ceddie says what he would buy his friends if he were rich. Havisham gives Ceddie money so he can. Ceddie says good-bye to the apple-woman (Jessie Ralph), Dick, and Hobbs, to whom he gives a gold watch.
Havisham takes Erroll to her house in England. She tells Ceddie that she is not going to the castle with him and the Earl. Havisham reports to the Earl of Dorincourt (C. Aubrey Smith), saying Erroll does not want money from him. Ceddie does not know the Earl dislikes his mother. At the castle Ceddie meets the servants and the Earl. He thanks the Earl for the money and helps him walk. Ceddie misses his mother Dearest and looks at her picture. Ceddie plays marbles with the Earl, and he gets him not to interfere with Higgins, who is behind on the rent. Ceddie wants to see his mother soon even though the Earl has a pony for him. The Earl takes Ceddie to Erroll but does not stay to meet her. The Earl and Ceddie go to church respected by all. Ceddie tells Higgins that the Earl is good and writes to Hobbs. Hobbs lets Dick live with him.
Ceddie meets Lady and Lord Lorridale and tells Miss Herbert that she is beautiful. Havisham tells the Earl that Ceddie is not Lord Fauntleroy, because an older son is in London with his mother. The Earl says he never thought he could be fond of a child. He and Havisham call on the presumed Lady Fauntleroy (Helen Flint), her son, and their lawyer Joshua Snade. She complains to the Earl, and he doesn't want to see them anymore. The Earl calls on Erroll, says he is proud of Ceddie, and promises to provide for him. The Earl tells Ceddie that he is not Lord Fauntleroy, but he can still be his boy. Hobbs reads news about Ceddie to Dick, who tells him that the Lady Fauntleroy is his brother Ben's wife Minna. Minna tells Snade she wants some fun. The Earl and Dick come in with Havisham, Ben, and Hobbs. Minna says that Ben's son Tom died; but Ben identifies the boy as Tom. At Ceddie's birthday party the Earl shows Hobbs paintings of earls. The Earl tells Ceddie that his mother will live there and Hobbs too.
Although the ending is rather contrived, the innocent love of the boy melting his grandfather and all whom he meets is a moving drama, showing there is always hope in the next generation.