Wacky complications ensue when a little boy comes into possession of a ray gun that compels anyone caught in its beam to tell the truth. He uses it to prevent his orphanage from being shut down by creditors and to help a cute couple fall in love.

Seven-year-old Timmy is thrilled when characters from his favorite television show, Captain Talray and His Outer Spacers , make an appearance at the county orphanage in which he lives, but afterward, is disappointed to find that the bigger boys have received all of the toy ray guns. An administrator offers Timmy airplanes instead, and while the boy is refusing, a real spaceman suddenly appears and, unseen, places a ray gun in the toy box. Timmy is thrilled with his present and soon after, is playing space rangers with his two best friends. Tragedy almost strikes when a drunken driver races down the road and comes within several feet of one of the boys, but a shot from Timmy's ray gun brings the car to a halt. Motorcycle police officer Mike O'Brien, who witnesses the event, believes that the accident was averted due to a sudden locking of the car's brakes, and arrests the man. The belligerent drunk yells at Mike that he is Big Bill Watkins, an important political boss, and will get him fired, but the pragmatic Mike ignores him. Meanwhile, Timmy returns to the orphanage, where Amelia Brown, the town's justice of the peace, offers to take him home with her for a while, as she has done with several orphans. Timmy, who has never had a real home, is wary of the widowed Amelia and her grown daughter June, but Amelia's ability to join in Timmy's imaginative games persuades him to accompany her. After they arrive home, Mike brings Watkins over for sentencing, and the no-nonsense Amelia refuses to listen to Watkin's blustering and sentences him to ten days in jail. Amelia and June then dine with Ed Johnson, the town mayor and Amelia's longtime beau, and Amelia receives a telegram from Warden Marshman, who is sending an unnamed, young parolee to stay with her. Ed is worried about Amelia having a "criminal" living in her house, but the fair-minded Amelia, who has helped a number of parolees, always believes in giving second chances. After dinner, Ed visits Watkins, whose political machine helped to elect him, and states that he cannot get Amelia to change his sentence. Watkins then calls his lawyer, Oliver Peabody, and tells him that he got arrested before being able to conclude the deal that they were working on. The following day, June goes to the bus stop to greet the arriving parolee and mistakes lawyer Tom Baxter for the ex-convict. Tom, who has been sent to aid Watkins, is taken with the pretty June and does not correct her mistake. Meanwhile, at home, Timmy continues to be amazed by Amelia's gentle treatment of him. June then arrives with Tom, whom Amelia warmly welcomes. The real parolee, Bob, also arrives with his girl friend Ludine, and is surprised when Amelia immediately grants their request to be married, then shooes them off on their honeymoon. That night, after dinner, Tom and June fall in love as they sit on the porch and discuss their future. Later in the evening, however, Amelia is visited by orphanage worker Harriet Snedley, who reveals that Watkins has put in a bid to buy the orphanage, as its lease with the county has just expired. Amelia is horrified, for the orphanage's closure will mean that the boys will have to go to the capital city's overcrowded facility, and an eavesdropping Timmy prays that she will be able to raise the four thousand dollars needed to outbid Watkins. When Timmy falls asleep, the spaceman appears in his room, and in his dreams, tells him that the ray gun can change lies to the truth and must always be used for good. The following morning, Tom reveals his real identity to Ed and admits that he placed the orphanage bid for Watkins, but now feels guilty because of how much he admires Amelia and June. Ed assures Tom that Amelia will forgive him if he tells the truth, but June refuses to listen to Tom's assurances that his affection for her is real. Tom leaves, intending to drive to the state capital, while Timmy sets up a "space monster" exhibit, consisting of household pets, to help Amelia raise money. Touched, Amelia takes him with her as she visits various bankers, but she is able to raise only $2,500. At the state capital, Tom lambasts the now-freed Watkins for his actions, and Watkins laughingly replies that after the following day's election, he will control the county. Tom quits and returns to June, who happily greets him upon hearing that he has reformed. Meanwhile, Amelia talks Ed into handing over his savings of $284, but after he and Timmy collect the money, Ed plays poker with his pals. With the help of Timmy's ray gun, Ed wins big and is able to give Amelia the rest of the money she needs. Amelia calls Harriet to tell her the good news, but Harriet, who is secretly in league with Watkins, warns him, and he arranges for the deed office not to accept her bid, citing an ancient ordinance prohibiting the sale of public land the day before an election. At that night's election rally, Amelia and her friends attend, determined to speak out against Watkins, who urges the audience to vote for his candidates. Ed attempts to make a speech about Amelia's honesty, in contrast to Watkins' corruption, but is booed by Watkins' planted hecklers. As Watkins states that he is buying the orphanage as a gift to the county, Timmy shoots him with his ray gun, and Watkins is compelled to admit that he is a lying, boozing scoundrel who is buying the orphanage because the land underneath contains a huge oil deposit. Later, after Watkins has been defeated, Amelia has placed Bob and Ludine in charge of the orphanage, and a happy Tom and June go with her and Ed to collect Timmy, who is playing with his friends. The oil well in front of the building has reaped large profits for the establishment, and as the adults admire their handiwork, Timmy enjoys eating green cheese sandwiches from the moon with his extraterrestrial friend.