It is Christmas Eve, a night of magic when anything can happen. The newly fallen snow glistens on the rooftops and excitement is in the air. Herr Drosselmeyer, an old friend of the Stahlbaum family and Clara’s Godfather, passes by their house to leave an early present for the family. Inside the Stahlbaum house, Clara and Fritz wait as their family makes sure everything is ready for that evening’s grand party. The guests arrive and the fun begins, with lots of dancing and many presents. 

When Drosselmeyer comes to the house, magical things always happen. Every year he creates delightful toys unlike anything else in the world. This year, he has some very special surprises for Clara and her family. Although Clara loves the lifelike Dancing Doll and Fritz the exciting Warrior doll, they cannot keep them. Instead, Drosselmeyer has another very unusual gift: a remarkable nutcracker, that he gives to Clara. Fighting to get the nutcracker for himself, Fritz regrettably breaks it. Drosselmeyer is quick to repair the nutcracker for Clara, but Fritz is still looking for trouble and finds a rat with which to tease Clara. After a final dance the party is over, the guests depart, and the Stahlbaums retire to bed. 

Clara is awakened by a strange sound. Worried about her nutcracker alone downstairs, she goes to find him and falls asleep on the couch. Suddenly, she is surrounded by mice! Drosselmeyer is acting very strangely and her nightmare continues as the whole house transforms around her. A menacing Mouse King orders his minions to steal the nutcracker from Clara. The Dancing and Warrior dolls come to help her, but the marauding mice carry them off. 

Just when Clara thinks all is lost, her nutcracker suddenly comes to life and temporarily scares the mice away. A large battle between the toy soldiers and the mice follows. The Mouse King is about to defeat the nutcracker, but Clara saves the day. She discovers that by defeating the Mouse King, she has freed the prince who had been trapped in the nutcracker. She understands that Drosselmeyer had a purpose in all the strange things he had done that night. 

Clara and her prince pass through a wondrous snowy land as they begin their journey together to his home in the land of the Sugar Plum Fairy.