Young Elizabeth Blair (Shirley Temple) lives at the Lakeside Orphanage, a dreary, regimented place supervised by two decent but dour women. Her older sister Mary (Rochelle Hudson) works in the kitchen, laundry, and dormitory. Elizabeth is a sweet child but her high spirits and creative imagination often lead her into trouble with the superintendent; such as one night when she snuck in her pet horse Spunky into the children's bedroom.