Elwood P. Dowd is an amiable, wealthy eccentric who introduces everyone he meets to his best friend, Harvey—a six-foot, three-and-a-half-inch tall invisible white rabbit. Elwood's insistence on Harvey's existence and his habit of introducing the pooka to high-society guests mortifies his social-climbing sister, Veta Louise Simmons, and her daughter Myrtle Mae.
Desperate to save the family's reputation, Veta attempts to have Elwood committed to a sanitarium. However, in a comedy of errors, the psychiatrist Dr. Sanderson believes Veta is the one hallucinating and commits her instead, while setting Elwood free. As the hospital staff realizes their mistake and scrambles to find Elwood, the film explores the infectious nature of Elwood's kindness and the magical possibility that Harvey might be real after all.
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