In the small town of Bedford Falls, George Bailey is a selfless individual who has always put his dreams on hold to help others in his community. As a young man, George aspires to travel and see the world, but time and again, he sacrifices his ambitions for the greater good. He takes over his late father's struggling savings and loan business to prevent the avaricious Mr. Potter, a wealthy and unscrupulous banker, from taking over the town. Throughout his life, George provides financial support to the townspeople, enabling them to avoid falling under Potter's control. Although content with his loving wife, Mary, and their children, the mounting pressures and responsibilities weigh heavily on George.

On Christmas Eve, after a sequence of misfortunes threatens the existence of his family's business, George's spirits are at an all-time low. Overwhelmed by the potential ruin and disgrace, he contemplates suicide, thinking his family and town would be better off without him. At this critical juncture, George's distress is answered by an intervention from above. An endearing, yet bumbling angel named Clarence is sent to Earth to help George realize the value of his life. Clarence sets out to demonstrate to George the profound impact he has had on the lives of those around him and what Bedford Falls would have become if he had never been born.