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Little Buddha is a story about the quest of a group of monks, led by Lama Norbu (Ruocheng Ying), to seek out the rebirth of his great Buddhist teacher, Lama Dorje (Geshe Tsultim Gyeltsen). Lama Norbu and his fellow monks believe they have found a candidate of Dorje's rebirth within a boy named Jesse Conrad (Alex Wiesendanger) in Seattle. While Jesse is fascinated with the monks and their way of life, his parents, Dean (Chris Isaak) and Lisa (Bridget Fonda), are wary, and that wariness turns into near-hostility when Norbu announces that he would like to take Jesse back with him to Bhutan to be tested. Jesse's father changes his mind however, after one of his close friends and colleagues commits suicide, seeming to realize that there could be more to life than work and money. He then decides to go to Bhutan with his son. In Nepal, two children who are also candidates are encountered, Raju (Rajuh Lal) and Gita (Greishma Makar Singh).
In the story, the Lama Norbu relates Buddha's life story from a book entitled "Little Buddha," which is also enacted as a story within the movie. In the story, prince Siddhartha (Keanu Reeves) sets upon a journey to achieve his goal of finding the ultimate goal of a human life.