It is Christmas Eve when families make their way to the celebrated Christmas party of Mrs. Stahlbaum and her children, Marie and Fritz.

The party is already alive with music and dancing when Uncle Drosselmeyer arrives with his magic wand and extraordinary toys. The children gather round as Drosselmeyer stages a puppet show, telling a story of a great battle between the Nutcracker Prince and the Mouse King. Afterwards, the children watch in awe as his magic wand waves to life mechanical dolls from around the world that  dazzle the crowd with their dancing. The children beg Drosselmeyer for one more surprise. Finally, he reveals the most magical wonder yet: the Nutcracker Doll.  Most of the children turn away from this odd looking creature. Marie, however, is instantly drawn to it, and as she begins to dance with her new companion, her enchantment grows. Her delight is suddenly interrupted when the Nutcracker slips from her fingers and breaks.  Tearfully, she asks Uncle Drosselmeyer to mend it, and soon the Nutcracker is good as new.

At last, the families return to their own homes, tired but happy. Just before midnight, Marie slips back to the place where she left her beloved Nutcracker. Suddenly, mice begin to fill the darkness and creep toward her cherished doll.  As Marie tries to protect the Nutcracker, the magic of Drosselmeyer  descends, causing the Christmas tree to grow, and the Nutcracker to jump to his feet, prepared for battle.  The Nutcracker Prince and his toy soldiers finally triumph over the Mouse King.  The old curse is broken, and the Nutcracker is free to become a Prince once more.  The Prince and Marie rejoice as the first Christmas snow sweeps them up and carries them to a far-distant land filled with magic.