The movie takes place in Cincinnati, Ohio in the year 1934 during the Great Depression. Kit Kittredge (Abigail Breslin) is 10 years old and dreams of being a reporter. She is often seen writing newspaper articles on her typewriter in her room. Her older brother has a friend who works for the newspaper and Kit visits often in hopes of getting an article published.
Times are tough and many people are losing their jobs. Two homeless “hobo” children, an older boy, Will, and a young boy, County, stop by outside Kit’s house to see if they can work for food. Kit takes the boys around back to the middle of her mother’s garden party. Some of the other ladies look distastefully at the hobo kids, but Kit’s mother not only promises the boys she will find work for them in the morning, but insists that they take some of the finger sandwiches that were put out for the garden party. Will refuses at first and then accepts the food as an advance on the next day’s work. After they leave some of the other ladies talk about how dangerous the hobos can be and how there have been reports of hobo crimes.
Kit and her friends are in Kit’s tree house when they see a foreclosure sign erected in the lawn of the house next door. Two of the girls in the tree house live next door and everyone is upset to see men bringing all the furniture outside. The girls’ mother is sobbing and Kit’s mother comforts her the best she can. Kit is worried about her family, but her father has a car dealership and everything seems fine for the moment.
At school some of the kids are laughing about Kit’s neighbors. The girl is no longer in school and some of the kids make fun of how her family sold eggs to make money and that the girl had to wear dresses made from the chicken feed sacks. The teasing stops when the teacher says they will all be volunteering at the soup kitchen and anyone who doesn’t want to come can write a 1500 word essay instead.
Things look very depressing at the soup kitchen where Kit and the other kids are volunteering. Kit understands this is where people come to eat when they don’t have jobs to pay for food. Suddenly she sees her father standing in the soup kitchen holding a tray of food. She runs out, horrified.
When they are both at home, her father tries to explain. He said the bank took the car dealership. This upsets Kit because her best friend’s (Ruthie’s) father owns the bank. Kit’s father says it is nothing personal. He tells her everything is going to be okay. Kit is very concerned that her family will start selling eggs since that is obviously one step from the poor house. Her parents laugh kindly and say they had no plans to do so.
Then comes the day when Kit’s father tells her he is going to Chicago to look for work. Kit is very upset and makes him promise he will write every week. Kit and her mother start taking in boarders to earn extra money. Their boarders are Miss Bond, a mobile librarian, Mr. Jefferson Berk, a magician, Miss Dooley, a dance instructor, and Mrs. Howard and her son, Stirling, who is a classmate of Kit’s. Mrs. Howard’s husband went to New York in search of work.
It is summertime and Kit often plays with Ruthie and Stirling. The hobo kids are around a lot doing various jobs. Kit is constantly looking for an interesting story to write an article for the newspaper especially since the grumpy editor read one of her articles and told her it was pretty good and to keep trying. He said they paid a penny a word for freelance writing. Kit asks Will and County if she can shadow them for a day in order to write an article on hobo life. They agree and Stirling and Ruthie come along as Kit’s assistants. Will tells them how his dad lost his job and how he eventually started riding the rails, looking for work. He met up with County and County’s father and hung around with them until County’s father died of influenza. Will promised County’s father he would look after the young boy.
Will takes Kit and her friends to the hobo camp. He shows them around and introduces them to some people and Kit takes some photos. Later she writes her story and takes it to the newspaper editor. He tells her that people don’t want to hear good stories about hobos because they are more interested in the reporting on hobo crimes.
Things are getting a little harder for Kit and her family. Her father has stopped writing with any frequency and her mother has decided to start selling eggs to help earn more money. This horrifies Kit as she knows what the other kids think about “egg sellers” and how it means they are close to the poor house.
The boarders have a discussion about the hobo crimes and decide to give Mrs. Kittredge their valuables to store in her lock box. Soon afterwards a robbery is reported at Ruthie’s house nearby. A man says he saw the thief and that it was a hobo with a limp. Kit asks if the hobo had a tattoo because she once saw a hobo steal a man’s wallet and the hobo had a tattoo on his arm. The man at Ruthie’s house says yes. The cops also find a set of boot prints with stars on the heels. These prints seem to match a set of boots that Mrs. Kittredge gave Will when his shoes were wearing out.
Later Kit runs into Will and finds he is limping. Suddenly, cops appear to question Will. They ask how he got the limp and he says someone jumped him, kicked him in the knee, and stole his boots. The cops are very suspicious and tell him not to leave town.
Meanwhile the boarder Mr. Berk’s cousin comes to town and is staying at the Kittredge house. Everyone is upset when Mr. Berk reports a robbery at the Kittredge house. He says he saw the fleeing thief and that it was Will. Kit protests that Will wouldn’t steal from them because he knows they don’t have much, but Mr. Berk is insistent. The cops go to the hobo camp the next day and find no sight of Will, but find the star boots in his tent and one of the boarder’s valuable item inside. Since the thief stole all of the Kittredge’s money, they can’t pay the mortgage and the bank puts a foreclosure sign in their lawn. Kit finds out that Ruthie talks to her banker father and gets them a one-month extension.
Kit, Ruthie, and Stirling try to solve the crime themselves and brainstorm about the possibilities. Kit saw a colorful tattoo on Mr. Berk’s cousin’s arm, so she suspects him. They sneak into his room, find a secret compartment on his trunk, and find some of the missing valuables. Mr. Berk and his cousin come home unexpectedly and the kids hide but leave the trunk open. The men are suspicious and plan to have the cousin leave town as soon as they recover the rest of the stolen goods he buried. Kit doesn’t want them to get away so she hides in their car and tells Ruthie to get help and go to the train station.
After the car leaves with Kit, Ruthie and Stirling ask the boarder Miss Bond for help. She tells them to get in her vehicle while she goes and calls the police. They drive to the station and see Mr. Berk’s car in the woods nearby. Miss Bond gets out and starts to approach the men who are digging up the lock box. When Ruthie tells Kit that Miss Bond called the police Kit reminds them that the phone at her house is disconnected. When the kids see Miss Bond start talking with the men, they realize that she is in on the thefts, too.
The kids distract the grown-ups, grab the lock box, and take off running with the adults in pursuit. They realize they are near the hobo camp and head there and run into Will. They tell him that they know who committed the crimes and he helps hide them in the hobo camp. The adults try to get info from the hobos to no avail. When they find the kids after Stirling sneezes, the hobos gang up on them and turn them into the authorities. It turns out the three thieves were responsible for crimes all over the country that were blamed on hobos.
The next scene is Thanksgiving dinner at Kit’s house. The doorbell rings during dinner and it is Will and County (who turns out to be a girl Will disguised her as boy to help protect her) and a lot of other local hobos who want to express their gratitude to Kit for clearing the hobo name. They come bearing gifts like vegetables and homemade dolls. Mrs. Kittredge invites them all inside. Kit goes outside and sees another figure approaching. It is her father who has returned home saying he will stay and look for work in Cincinnati. There is a very happy reunion between Kit, her father, and her mother. Next, the newspaper editor arrives and says he has just published Kit’s hobo life article. She is thrilled! It is a very happy ending.