On Christmas Eve, hundreds of Christmas elves helm the command centre of Santa Claus’s mile-wide, ultra–high-tech sleigh-esque craft, the S-1. The current Santa (Malcolm) and the Christmas elves deliver presents to every child in the world using advanced equipment and military precision. These complex operations are micromanaged by Malcolm’s oldest son Steve and his obsequious elfin assistant Peter (among thousands of more elves) at mission control underneath the North Pole, while Steve’s clumsy and panophobic younger brother Arthur answers the letters to Santa. During a delivery operation, when a child wakes up and almost sees Malcolm, a Christmas elf back in the S-1 inadvertently presses a button, causing a present to fall off a conveyor and go unnoticed.
Having completed his 70th mission, Malcolm is portrayed as far past his prime and whose role in field operations now is largely symbolic. Nonetheless, he is held in high esteem, and delivers a congratulatory speech to the enraptured elves. Much to Steve’s frustration, who has long anticipated succeeding his father, Malcolm announces he looks forward to his 71st. During their family Christmas dinner, Arthur’s suggestion for the family to play a board game degenerates into a petty quarrel between Malcolm and Steve, while Malcolm’s father and predecessor Grandsanta, bored by retirement, resentfully criticizes their over-modernization. Distraught, the various family members leave the dinner table. When Arthur humbly compliments Steve that he believes he will be a great Santa Claus, Steve rudely dismisses Arthur’s overture. Later, their father shares with his wife Margaret his grave doubts about his self-identity should he retire.
Meanwhile, a Christmas elf named Bryony finds the missed present—a wrapped bicycle that has yet to be delivered—and alerts Steve and Peter to the problem. Arthur is alarmed when he recognizes the present as a gift for Gwen, a little girl whose letter he had personally replied to. Arthur alerts his father, who is at a loss as to how to handle the situation; Steve argues that one missed present out of billions is an acceptable error whose correction can wait a few days. Grandsanta on the other hand, apparently learning of the dire situation, proposes delivering the gift using Eve, his old wooden sleigh, and the great-great-grandchildren of the original eight reindeer, forcefully whisking away a reluctant Arthur and a stowaway Bryony. They get lost in three different continents, lose several of their reindeer, and land in danger several times, ultimately being mistaken for aliens and causing an international military incident. Through all this, Arthur eventually learns, to his compounding disappointment, that Grandsanta’s true motive is to fulfill his ego, that Steve refuses to help them out of petty resentment and possibility of his brother being made hero overshadowing his work, and that his own father has gone to bed, apparently content even though a present was not delivered.
Finally, stranded in Cuba after losing the sleigh and the remaining reindeer, Arthur renews his sense of purpose—that it all comes down to having presents delivered, regardless of how it is done and who did it—and with Grandsanta’s and Bryony’s help manages to recover the sleigh. Meanwhile, the elves grow increasingly alarmed at rumors of this neglected delivery and the Clauses’ unthinkable indifference, sending them into a panic. In response, Malcolm, Margaret, and Steve take the high-tech sleigh-craft to deliver a superior present—to the wrong child.
In the meantime, Arthur and his party lose the remaining reindeer and a US Predator drone scrambled by Chief De Silva of UNFITA intercepts and opens fire on them thinking that they were aliens, causing Arthur to bail out of the sleigh, via parachute. Ultimately with Margaret and Bryony’s help, all the male Clauses arrive at Gwen’s house before she awakens, only to have all but Arthur quarrel about who gets to actually place the gift. Noticing that only Arthur truly cares about the girl’s feelings, the elder Clauses collectively realize that he is the sole worthy successor. As a result, Malcolm gives Arthur the honor and Steve, upon learning of his own errors, acknowledges that his brother is the worthy Santa instead of him and forfeits his supposed birthright to his brother. In a fitting conclusion, Gwen glimpses a snow-bearded Arthur in a wind-buffeted sweater just before he vanishes up into the S-1.
With the crisis resolved, Malcolm goes into a happy retirement with Margaret; he also becomes Grand-Santa’s much-desired new companion and plays Arthur’s board game with him for many happy hours. Meanwhile, Steve finds true contentment as Chief Operating Officer while Bryony is promoted to Vice-President of Packing, Pacific Division. In a nod to traditionalism once neglected, the high-tech S-1 is re-christened EVIE in honor of Grandsanta’s old sleigh and refitted to be pulled by a team of five thousand reindeer—led by the original eight, all of whom managed to return safely via innate navigational abilities. Finally, Arthur happily guides the entire enterprise in the proper spirit as the new Santa.