Buddy (Will Ferrel) is a very happy elf. Although he is much bigger than everyone else and he doesn't seem to be particularly good at making toys, he loves Christmas so much and really enjoys life at the North Pole. But the elf who raised him (Bob Newhart) finally decides to tell Buddy the truth - he is human who smuggled himself into Santa's bag as a baby, after a stop at an orphanage. When Buddy goes to find his biological father (James Caan) he finds that the world of humans seems to have forgotten completely about the magic of Christmas. Buddy makes it his mission to bring the Christmas spirit to his new human family.