Dr. Malcom Crowe is honored with an award for his work in child psychology, with his wife Anna playfully saying it’s thanks to his putting everything else in his life second, including her. However, that same night he’s confronted by Vincent Grey, a former patient who furiously accuses Malcolm of not helping him at all so that his issues still plague him as an adult. He shoots Malcolm in the stomach before committing suicide.
Several months later, Malcolm has recovered physically but is still stricken with doubt about his work, causing him to throw himself into it even more at the expense of his marriage, with Anna having grown very distant from him. His newest case is 9-year-old Cole Sear, who similar to Vincent is showing signs of self-harm and kleptomania, including his mother Lynn’s treasured bumblebee pendant she got from her mother. Cole is at first very reluctant to talk, but Malcolm wins him over by communicating on his level. Unfortunately, this causes him to miss his anniversary dinner, and Anna’s only response to his apology is a bitter "Happy anniversary" as she pays the check.
Cole has a serious breakdown at school when he hears a voice that gets him trapped in a closet, and is finally driven to tell Malcolm the truth behind his actions: he is able to see ghosts, who don’t know they’re dead and are still trying to live their regular lives, unable to see that anything strange is going on. Malcolm considers dropping the case as Cole is in need of a better specialist, with the situation also not helped by his discovering that Anna has been taking anti-depressants without telling him, and also getting close to another man who simply drives away as Malcolm yells after him. However, he then listens to an old tape of a session with Vincent, and is shocked to discover that with the volume turned all the way up, a voice in Spanish is faintly audible.
Malcolm assures Cole that he now believes everything, and suggests the ghosts are drawn to him to help them complete some unfinished business before they can fully pass on to the afterlife. Cole puts it to the test with a young girl who recently died, who directs him to a videotape in her house and says to give it to her father. It turns out that while filming a puppet show, she captured evidence that her mother had been poisoning her, leading to a confrontation at the funeral and the girl’s business fulfilled.
Cole becomes much happier with his purpose realized, able to see his ability for more than the curse Vincent always did. He and Malcolm have one last conversation, where Cole suggests he talk to Anna while she’s asleep, as sometimes people are more honest that way. Shortly afterward, Cole opens up to Lynn about his ability, including that her mother is one of the ghosts and is the one who took the pendant, proving it with a private story Lynn had never told anyone, and passing on the message that she makes her mother proud every day.
Malcolm takes Cole’s advice, and is confused when the sleeping Anna asks "Why did you leave me?" Then Malcolm’s wedding ring slips from her hand, and sure enough he sees he’s not wearing it. With that, he finally realizes Vincent actually killed him with that gunshot, and just like all the other ghosts, his denial of his death had kept him from noticing that he hasn’t actually interacted with a single person besides Cole for the past several months. Lynn never hired him, he simply approached Cole on his own with the same instinct that draws the others, and Anna’s "affair" has actually been her moving on from losing him. After the realization, he speaks again to Anna, saying that helping Cole to atone for his failure with Vincent was his own unfinished business, as well as making clear to her "You were never second." With that, a white light envelops him as he moves on for good.
