Jimmy and his sister Samantha are celebrating their first Christmas since the death of their father. While Samantha embraces the holiday spirit, Jimmy is filled with apathy and indifference over the season.

On Christmas Eve, after Jimmy breaks one of his father's ornaments, a strange force shrinks both he and his sister down to ornament size. On the lowest branch, they meet an Old St. Nicholas ornament who explains that the Star Angel, residing at the very top of the Christmas tree, alone has the power to return them to normal size and must do so before sunrise, when the magic that brings the ornaments to life will fade away, turning Jimmy and Samantha into ornaments as well.

With the aid of the Cookie Dough Man '66, Lighthouse, Sheriff and Pockets the tramp clown, they embark on a journey to the top of the tree.

Determined to stop them is Scrimshaw, who has vowed revenge against Jimmy for dropping him on the floor and causing him to break, only to be glued back together again, and forever banished to Empty Side.

It becomes a race against the clock to reach the top of the tree as Scrimshaw and his hideous, disfigured army from Empty Side pursue the kids and their merry gang in this musical adventure.