As an orphan baby, Buddy crawls into Santa's toy bag and is whisked off to the North Pole, where he is raised as an elf. After growing up to be three times the size of his elf family, Santa allows Buddy (Will Ferrell) to go to New York City to find his birth father, Walter Hobbs (James Caan.)
Unfortunately, Hobbs turns out to be a "Scrooge"-like father whose family seems to have forgotten the true meaning of Christmas. Buddy, meanwhile, experiences the delights of New York City (and human culture) as only an elf can.
But using his simple elf ways, Buddy sets out to single-handedly win over his family and save Christmas in New York, hoping to at last find his true place in the world.