A liberal priest tries to soften the strict nun running St. Mary's school.

When Father O'Malley is designated priest of St. Mary's church and its concomitant elementary school, he is warned that the strong-willed nuns drove the previous priest into a rest home. Unfamiliar with the precepts of running a school, O'Malley incurs the disapproval of Swedish American Sister Mary Benedict, the Mother Superior and school principal, when as his first official act, he grants the students a holiday. As Sister Benedict escorts O'Malley on a tour of the dilapidated school building, she points to the building under construction across the way and confesses that it is her dream to have its owner, wealthy, old curmudgeon Horace P. Bogardus, donate his building to the church. Later, O'Malley meets Bogardus when he complains about the children playing on the fence surrounding his building. Bogardus warns O'Malley that unless the church agrees to sell him the school to use as a parking lot, he will ensure that the city council will condemn it. After leaving Bogardus, O'Malley is approached by a desperate woman, who begs the priest to allow her little daughter Patsy to attend the school. The woman, full of self-recrimination, relates the sad story of how her husband, a musician named Joe Gallagher, deserted her soon after the birth of their child and how she has had to depend on the generosity of men to support her young daughter. Sympathetic, O'Malley agrees to care for the troubled Patsy, who experiences difficulty adjusting to the school. As the office building nears completion, Sister Benedict visits Bogardus in his new quarters and envisions a modern classroom and gymnasium there. Overworked and aggravated, Bogardus is then paid a housecall by his physician, Dr. McKay. As the doctor is recommending relaxation and rest, Bogardus recoils at the sound of the school choir across the schoolyard and slams the window shut, causing it to shatter. One day, O'Malley visits Patsy's mother with news that he has located her husband, who is now anxiously waiting to meet her in the hallway. Mrs. Gallagher runs into the hall, and the couple is reunited after being separated for many years. At the same time, Patsy, excited at the thought of her upcoming graduation, goes to visit her mother to show off her commencement dress. Spotting her mother speaking to Gallagher, Patsy believes that he is one of her mother's clients and flees the building. Patsy fails her exams, but O'Malley urges Sister Benedict to pass the girl in order to boost her confidence. The sister adamantly refuses, however, arguing that the school must maintain its standards. Informed that she has failed her courses, Patsy somberly returns her graduation dress. Soon after, Sister Benedict becomes ill and O'Malley sends for Dr. McKay. As they await the doctor's arrival, Sister Benedict chides O'Malley for writing to the Mother General about Patsy. Although Sister Benedict protests that she is just tired and demoralized by her inability to save St. Mary's, the doctor insists on examining her in his office the next day. On the doctor's way out, O'Malley questions him about Bogardus' heart condition and suggests that good deeds can cure a bad heart. The next day, O'Malley meets Bogardus after he has just visited his physician. Bogardus is preoccupied by the doctor's diagnosis of his condition, but is consoled by O'Malley, who encourages him to perform good deeds. Taking the priest's advice, Bogardus dashes into the street to save a stray dog. After ushering an elderly woman onto her bus, Bogardus then proceeds to the church. Astonished by the sight of Bogardus bowed in prayer, Sister Benedict approaches him and, after confessing that he has acted selfishly, he offers the nun his new building to use as a school, making her giddy with happiness. The good news is soon clouded by Dr. McKay's diagnosis that Sister Benedict is suffering from the early stages of tuberculosis and should be sent to a dry climate and relieved of all strenuous duties. Although the doctor cautions O'Malley to keep the sister's condition secret from her, the priest fears that sending her away without an explanation will lead her to believe that she was transferred at his behest. As the sister arranges the furniture in the new classroom, O'Malley notifies her that she is being transferred, causing her to react with disbelief and sorrow that she will no longer be working with children. Soon after, the girls prepare for their commencement ceremony as Patsy watches longingly in the distance. Upon seeing her mother and her male escort enter the schoolyard, she ducks behind a post to hide, and when Sister Benedict observes her actions, she realizes that Patsy never told her mother that she has failed. Anguished, Patsy asks for the nun's help and admits that she deliberately failed so that she could remain at the school. When O'Malley introduces Patsy's parents to Sister Benedict, Patsy is dumbfounded to learn that the stranger is actually her father. After Mrs. Gallagher promises Patsy a real home and a new life, O'Malley remarks that the couple has come to watch their daughter graduate. Finally comprehending the enormous handicap under which Patsy has suffered, Sister Benedict relents and allows the girl to graduate. After the ceremony, Sister Benedict visits the chapel one last time to pray for guidance. When she departs, bent in sorrow, O'Malley, overwhelmed with compassion, tells her the truth about her condition. Immensely relieved, the sister fills with joy as she bids farewell to the priest.