In the heart of Philadelphia, child psychologist Malcolm Crowe grapples with a haunting reminder of his past failures when Vincent Grey, a former patient, violently intrudes upon his life. This encounter leaves Malcolm confronting a wave of devastation and despair that echoes a fateful night he cannot forget. His emotional turmoil intensifies as he begins to work with Cole Sear, a vulnerable nine-year-old child who bears a striking resemblance to the troubled Vincent.

As Malcolm Crowe digs deeper into Cole’s inner world, he is engulfed by guilt over his inability to help Vincent, all while his marriage to Anna hangs by a thread. Their bond, once strong, has now turned cold, with Anna struggling to navigate the repercussions of their shared trauma.

Meanwhile, Cole’s mother, Lynn, becomes increasingly anxious about her son’s welfare, especially upon witnessing the alarming physical signs of distress he suffers. The tipping point occurs at a birthday party when bullies trap Cole in a cupboard, triggering a frantic scream about the unseen entities that haunt him.

As the layers of truth gradually peel away, Cole finally reveals to Malcolm Crowe his extraordinary ability: he sees dead people who roam among the living, completely unaware of their own demise. Initially doubtful, Malcolm is compelled to confront the reality of Cole’s claims after listening to an audiotape from a session with Vincent, which unveils the plea of a man seeking help in Spanish, indicating that Vincent shared Cole’s special gift.

That revelation encourages Malcolm to adjust his approach, urging Cole to utilize his talent for the benefit of the restless souls he encounters. One pivotal night, Cole makes contact with Kyra Collins, a young ghostly figure suffering from an otherworldly curse. He learns her tragic story and attends her funeral reception with Malcolm, where she bestows a vital videotape that ultimately protects her younger sister from their mother’s malevolence.

As Cole continues to flourish both socially and personally, he finds himself taking a prominent role in the school play, mentored by a ghostly director who influences him towards an exceptional performance. Malcolm Crowe watches with pride, filled with emotion as Cole embodies his character, a poignant reminder that even the most troubled spirits can find redemption through the arts.

In the aftermath of this heartfelt moment, Cole advises Malcolm to establish a deeper connection with Anna, suggesting that he try to reach out to her during her sleep. Amid a traffic jam, Cole confides in Lynn about his unique abilities, encountering initial skepticism. However, when he shares intimate details about their family history, which he learned from his grandmother’s ghostly visits, Lynn’s disbelief transforms into understanding.

This touching narrative illustrates how Cole Sear, played by Haley Joel Osment, discovers solace in his remarkable gifts, using them to heal the living while seeking peace among the dead. As Malcolm revisits the scene of his own wedding day, a poignant video serves as a stark reminder of his past, contrasted by the tranquility of his present. Anna’s gentle voice whispers a haunting inquiry: “Malcolm, why did you leave me?” This unvoiced agony resonates deeply as Malcolm’s eyes fixate on the symbol of their union—his wedding ring, absent from his finger, sparking a revelation that unravels the essence of his being.

The chilling insights from Cole resonate in his thoughts, accentuating the limitations of the deceased, who can only see what they wish. It is then that Malcolm recalls the gunshot wound he had long overlooked, unveiling a painful realization: he never survived Vincent’s attack. The weight of this truth envelops him like a shroud—he has been a ghost, existing in limbo as he navigated the intricate relationships around him.

With this newfound comprehension, Malcolm gathers the courage to reach out to Anna, expressing profound love and appreciation. The tension etched on her face begins to soften, replaced by an enduring calmness, signaling that she has finally attained peace. Having resolved his unfinished business with both Anna and Cole, Malcolm’s spirit transitions into a brilliant flash of light, leaving behind a treasured sense of closure and acceptance.