Twelve-year-old Josh Baskin, who lives with his parents and infant sister Rachel in Cliffside Park, New Jersey, is told that he is too short for a carnival ride called the Super Loops, while attempting to impress Cynthia Benson, an older girl. He inserts a coin into an unusual antique arcade fortune teller machine called Zoltar, and makes a wish to be "big". It dispenses a card stating "Your wish is granted", but Josh is spooked when he notices that it has been unplugged the entire time.
The next morning, Josh has suddenly grown into a full-fledged adult; it turns out the Zoltar machine can actually make wishes come true. He tries to find the machine, only to see an empty field, the carnival having moved on. Returning home, he tries to explain his predicament to his mother, who refuses to listen and then threatens him, thinking he is a stranger who has kidnapped her son. Fleeing from her, he then finds his best friend, Billy, and convinces him of his identity by singing a rap which only they know. With Billy's help, he learns that it will take at least six weeks to find the Zoltar machine again, so Josh rents a flophouse room in New York City and gets a job as a data entry clerk at the MacMillan Toy Company.
Josh meets the company's owner, Mr. MacMillan, at FAO Schwarz, and impresses him with his insight into current toys and his childlike enthusiasm. They play a duet on a foot-operated electronic keyboard, performing "Heart and Soul" and "Chopsticks". MacMillan invites Josh to a massive marketing campaign pitch meeting with the senior executives. Unimpressed with the toy, Josh shocks and challenges the executives with a simple declaration that the toy is not "fun," and while his follow-up suggestions invigorate the team for new ideas, he earns the animosity of Paul Davenport, the pitch's leader. Pleased, Mr. MacMillan promotes Josh to his dream job: getting paid to test toys as vice president in charge of Product Development. With the promotion, his larger salary enables him to move into a spacious luxury apartment, which he and Billy fill with toys, a rigged Pepsi vending machine that dispenses free drinks, and a pinball machine. He soon attracts the attention of Susan Lawrence, a fellow MacMillan executive. A romance begins to develop, much to the dismay of her ruthless former boyfriend and coworker, Davenport. Josh becomes increasingly entwined in his "adult" life by spending time with her, mingling with her friends, and being in a steady relationship. His ideas become valuable assets to MacMillan Toys; however, he begins to forget what it is like to be a child, and his tight schedule now means that he never has time to hang out with Billy.
MacMillan asks Josh to come up with proposals for a new line of toys. He is intimidated by the need to formulate the business aspects of the proposal, but Susan says that she will handle the business end while he comes up with the ideas. Nevertheless, he feels pressured and longs for his old life. When he expresses doubts to Susan and attempts to explain that he is really a child, she interprets this as fear of commitment on his part and dismisses his explanation.
Josh learns from Billy that the Zoltar machine is now at Sea Point Park. He leaves in the middle of presenting the proposal to MacMillan and the other executives. Susan also leaves and encounters Billy, who tells her where Josh went. At the park, Josh finds the machine, unplugs it, and makes a wish to become "a kid again". He is then confronted by Susan, who, seeing the machine and the fortune it has given him, realizes that he was telling the truth. She becomes despondent at realizing their relationship is ending. He tells her that she was the one thing about his adult life that he wishes would not end and suggests that she use the machine to wish herself younger. She declines, saying that being a child once was enough, and takes him home. After sharing an emotional goodbye with Susan, he becomes a child again before reuniting with his family. The film ends with Josh and Billy hanging out together as the song "Heart and Soul" plays over the credits.
Tom Hanks as Joshua "Josh" Baskin
David Moscow as Young Josh
Elizabeth Perkins as Susan Lawrence
Robert Loggia as Mr. MacMillan
John Heard as Paul Davenport
Jared Rushton as Billy Francis Kopecki
Jon Lovitz as Scotty Brennen
Mercedes Ruehl as Mrs. Baskin
Josh Clark as Mr. Baskin
Debra Jo Rupp as Miss Patterson