The movie begins at the North Pole with Santa Claus (George Wendt) and his dog Santa Paws (Tom Bosley) taking a look at the magical Christmas Icicle, which is melting because of nobody believing in Christmas anymore; if it continues to melt, Christmas will be gone forever.
Puppy Paws (Zachary Gordon) is the fun-loving son of Santa Paws who gets tired of the North Pole and finds Budderball (Josh Flitter) on Santa's naughty list for eating the Thanksgiving turkey and figures he's just the dog to show him how to be an ordinary puppy.
The film then moves forward to Budderball and the other Buddies (Field Cate, Liliana Mumy, Skyler Gisondo, Ty Panitz) in Fernfield, who also don't have any Christmas spirit, believe that their father is Santa Paws and that the naughty list is a way to scare them to behave. However, Sniffer (Tim Conway) replies that Christmas is about giving and a holiday they must learn to respect.