Sam the Snowman is introduced at the start of the special. He welcomes the viewers to Christmastown and introduces the Clauses, Santa and Mrs. Claus, who live in a castle located left of the Christmas Tree Forest. Later, Sam recalls the year Christmas was almost cancelled due to a big snowstorm and how a very special reindeer saved the day.
Donner, Santa’s lead reindeer, and his wife have just given birth to their new son Rudolph, whom they’re surprised to find out has a glowing red nose. Santa Claus arrives to meet him and is surprised by his glowing nose as well and warns them that Rudolph will not pull his sleigh because of this. With that, Donner covers Rudolph’s nose with mud to make him fit in with all the other reindeer.
A year later, Rudolph’s parents take him out to the reindeer games where Rudolph, along with all of the other young bucks, will be trained to fly and pull Santa’s sleigh when they get older. There, Rudolph meets a friendly reindeer named Fireball, and they quickly become friends. The pair then sees a group of does, including one named Clarice, who seems to be attracted to Rudolph. Fireball encourages Rudolph to speak with her. After the two introduce each other, Clarice tells Rudolph he is cute causing him to perform a dazzling leap into the air and fly. However, when Rudolph and Fireball engage in celebratory play, the cover pops off Rudolph’s nose and unveils his “non-conformity”, scaring Fireball and ending their friendship. All of the others then make fun of Rudolph’s nose, and he is not allowed into any more reindeer games. Clarice isn’t bothered by this and catches up with the sulking Rudolph to try to comfort him. However, Clarice’s father comes and forbids her from being with Rudolph.
Meanwhile, an elf named Hermey dreams of becoming a dentist rather than making toys. The Boss Elf becomes outraged at his persistent obsession, which is interfering with his work as an elf, causing Hermey to quit. Eventually Hermey and Rudolph meet and, noting that they are both misfits in their respective societies, decide to team up and run away together.
Along the way, Hermey and Rudolph meet a cheerful and boisterous prospector named Yukon Cornelius, who dreams of discovering silver and gold, before the trio encounters an irritable Abominable Snow Monster (the Bumble, for short) who is attracted to Rudolph’s nose. Escaping on an ice floe, the trio arrives on the Island of Misfit Toys; the island is a haven for defective and otherwise abandoned toys, overseen by a winged lion named King Moonracer. The king, while denying the trio’s request to live there permanently because they are living creatures, agrees to let them stay for one night in exchange for a promise that as soon as they return to Christmastown, they will ask Santa to deliver the Misfit Toys to children who need them. During the night, Rudolph decides to leave the island alone, knowing that his nose will endanger his friends.
Rudolph grows older and drifts from place to place, making and losing friends as he is continually rejected for his glowing nose. He returns to the North Pole two days before Christmas to find that his peers continue to mock him, and his parents, along with Clarice, had left to search for him months ago. Rudolph then sets out to find his family and discovers that they have been captured by the Bumble, who plans to eat them. After a brief fight, Rudolph is knocked unconscious. Fortunately, Hermey and Yukon arrive, and hatch a rescue plan. Luring the monster out of the cave, the pair knock the Bumble unconscious with a boulder and extract his teeth. Rudolph awakens, but he and his family are blocked from their escape by the also awakened beast who is now toothless. Yukon boldly chases the Bumble from the cave entrance to a cliff, driving them both off the edge. Mourning Yukon’s assumed death, Rudolph, the Donners, Clarice, and Hermey nonetheless return home, where everyone apologizes for the way they acted while the travelers relate their adventure.
Santa promises Rudolph that he will find homes for all the Misfit Toys, the Elf Foreman agrees to let Hermey open his own dentist’s office a week after Christmas. Even Donner apologizes to Rudolph for being critical about his nose. During the celebration, Yukon returns with a tamed Bumble, now a kinder and gentler monster, and thus reveals he survived because as he states “bumbles bounce!” However, a huge blizzard blows in, which threatens to cancel Santa’s flight. While announcing the news to the elves and reindeer, Santa notices Rudolph’s gleaming nose and decides that its light could cut through the storm. With Rudolph leading the sleigh team, Santa and his reindeer fly off to the island where the Misfit Toys, still grieving about being left out and unloved, are cheered up when Santa and Rudolph arrive to pick them up. The special ends with Santa wishing the viewers a merry Christmas as he and Rudolph fly off into the night.