Opening in 1919, shortly after the end of the First World War, the film focuses on the lower middle class Gibbons family after they settle in a house in Clapham, South London. The household includes Frank, his wife Ethel, their three children – Reg, Vi and Queenie – his widowed sister Sylvia and Ethel's mother. Frank is delighted to discover that his next-door neighbour is Bob Mitchell, a friend from his days in the army.
Frank finds employment in a travel agency run by another old army chum. As the children grow up and the country adapts to peacetime, the family attend a number of events, such as the British Empire Exhibition held at Wembley in 1924.
Reg becomes friendly with Sam, a staunch socialist, who is attracted to Vi. Queenie is pursued by Bob's sailor son Billy, but she longs to escape the suburbs and lead a more glamorous life elsewhere.
During the General Strike of 1926, Reg is injured in a brawl in Whitechapel Road. Vi blames Sam, who had brought her brother to the area, but eventually her anger dissipates and she marries him.
In 1928, Charleston dance mania arrives in England; Queenie exhibits her fancy steps at the local dance hall and wins a dance contest. As all of London is swept up in the Jazz Age, news of new German chancellor Adolf Hitler begins to appear in the newspapers. Reg marries Phyllis. Billy proposes to Queenie, but she confesses she is in love with a married man and soon after runs off with him. Her mother says she cannot forgive her and never wants to see her again.
As time passes, Aunt Sylvia discovers spiritualism, Reg and Phyllis are killed in a car crash, and the British Union of Fascists tries to stir up anti-Semitic sentiment in the city. Stanley Baldwin becomes Prime Minister, King George V dies, and Ethel's mother passes away. When Neville Chamberlain returns from Munich with the promise of "peace in our time", Frank is disgusted by people's enthusiastic response.
Billy, home on leave from the Royal Navy and now a sub-lieutenant, announces to the family he ran into Queenie while on shore leave in France. Abandoned by her lover, she and an older woman opened a tearoom to make ends meet. She deeply regrets having left home. Billy reveals they were married two weeks previously in the Plymouth Registry Office and he has brought her back to London; Ethel forgives her.
With the Second World War on the horizon, Queenie has a baby son, whom she leaves in the care of her parents when she sails to join her husband in Singapore. Frank and Ethel, faced with an empty nest, decide to sell the house and move to a flat with their grandson.
In 1942, David Lean and Noël Coward had co-directed In Which We Serve. This Happy Breed marked Lean's solo directorial debut. He and Coward later teamed for Brief Encounter and Blithe Spirit.
Coward had played Frank Gibbons on stage, and he wanted to reprise the role on screen. Lean felt the playwright's public persona of witty sophistication was so far removed from his humble lower class origins that audiences would be unable to accept him as Gibbons, and he initially offered the role to Robert Donat instead. Donat refused the role because he objected to the final speech delivered by his character in the stage version. As he explained in a letter to Coward: "Rightly or wrongly, I believe it is just that very political irresponsibility that got us into another war". The role was given to Robert Newton, whose reputation for alcoholism lead the producers to require Newton to sign a contract relinquishing £500 of his £9,000 salary, every time his drinking caused a delay in production. According to the film's cameraman Ronald Neame, by the end of filming, Newton had forfeited his entire salary, although the producers forgave him and paid his full fee.
Lean insisted on filming This Happy Breed on three-strip Technicolor stock, although the film was difficult to acquire in Britain during the war. At the time, a Technicolor representative was assigned to the set of every film that utilised the process to ensure everything looked right on film. Lean was contractually required to follow strictly the guidelines proposed by the consultant, whose expertise he questioned and who drove him to distraction because of her concentration on the minutest details. The released film barely resembles a standard Technicolor film, which was Lean's intention. It proved to be the most successful British release of 1944 and the first of many critically acclaimed films directed by him.
Between March 2006 and January 2008, the restoration of This Happy Breed, combining digital and photochemical techniques, was carried out at the British Film Institute's National Archive's Conservation Centre in Berkhamsted and at Cineric, a post-production facility which combines optical printing and photochemical restoration with innovative digital techniques, in New York City. The project included correcting the colour and a full digital restoration of the picture and soundtrack. The most time-consuming part of the sound restoration process involved removing background noise that caused dialogue to become muffled when conventional methods of noise reduction were used to remove it. Technicians had to filter the noise between individual words to eliminate static. The restored film was screened as part of a major David Lean retrospective at BFI Southbank in mid-2008.
The film's soundtrack, which includes the song London Pride, was performed by the London Symphony Orchestra, conducted by Muir Mathieson.
According to trade papers, the film was one of the 12 most popular movies of the year at the British box office in 1944.
TV Guide rated the film four stars and called it "an immensely charming movie, with many tears and many moments of warmth."
Time Out London said, "Though Lean and Coward are less happy here than in the brittle, refined atmosphere of Brief Encounter, their adventurous excursion into suburban Clapham remains endlessly fascinating."
Channel 4 rated it 3½ out of five stars and added, "A toff propagandist's England, of course. But once you've got over its peculiar patrician tones and bitty structure, there's much to enjoy – not least the changing frocks and haircuts and wallpapers."
Radio Times gave it five out of five stars and said "This second of David Lean's four collaborations with Noël Coward provides a fascinating picture of the way we were. ... such is the ebb and flow of events (both domestic and historical) that the two hours it takes to cover the 20 inter-war years seem to fly by. Celia Johnson is superb ....the best scenes belong to neighbours Robert Newton and Stanley Holloway"
The National Board of Review named Celia Johnson Best Actress for her portrayal of Ethel Gibbons.