On the planet Mars, the Martian's Leader named Kimar notices a listlessness that seems to be taking ahold of the children of Mars. This is evident when he finds his own children (Bomar & Girmar) spending much time watching Earth Programs on the videoscope. Kimar's wife, Momar, suggests that he seek advice from Chochem, the Ancient One.
Kimar gathers a number of other Martians and goes to see Chochem. Though it is the middle of Septober on Mars, Chochem explains that on Earth, it is drawing closer to Christmas, and this could explain why the children of Mars are behaving so strangely. Chochem then goes on to decry how Mars tends immediately work on educating their young, giving no time for play or fun. Chochem finally decrees that the children must have fun, and says that Mars needs a Santa Claus, just as Earth has.
Kimar takes Chochem's words to heart, and assembles a crew to go to Earth to capture Santa Claus. Of the crew, almost everyone is in agreement except for Voldar, who reluctantly comes along, even though he feels this is a mistake.
Observing the Earth, the men are shocked to find that there seem to be hundreds of Santa's, many of whom are standing on corners ringing bells. Kimar believes that if they capture the real Santa, they then won't have any trouble with hundreds of Santa's running around.
Setting down near a small lake, the martians meet two children named Billy and Betty. After explaining what they saw, Billy informs the Martians that the ones they saw were Santa's helpers, and that the real Santa lives at the North Pole. The martians then take the two kids with them, to prevent them from telling the authorities.
On the Martian ship, Billy and Betty are supervised by a clumsy martian named Dropo. After sneaking them onto the ship's bridge, Dropo quickly hides the two in the radar box before Voldar enters onto the bridge.
As the ship lands at the North Pole, the two children overhear the martians planning to kidnap Santa Claus, and also take the two of them to Mars. After the martians leave the ship, Billy and Betty escape, planning to get to Santa first to warn him. However, before they can get far, they encounter a Polar Bear, and then a robot named Torr, who captures them. The children are returned to the ship shortly thereafter.
Torr and the Martians then head to Santa's workshop. Upon finding others there, Voldar and another martian use a freeze-ray, that stops several elves and Mrs Claus in their tracks. Kimar assures Santa the effect will wear off in a few hours, before taking Santa with them.
Sometime afterward, Mrs Claus unfreezes, and alerts the media. The United Nations and the Space Program then immediately decide to send a rescue ship to try and catch the Martians, but it's too late as the ship is too far away.
On the Martian's ship, Santa's jolly spirit infects many of the crew, but Voldar finds the entire cheeriness ridiculous, and attempts to shoot Santa and the kids out of the ship's airlock. Voldar is then captured and locked in a cell. Though right after the ship lands, several other martians instead find Dropo in the cell, and find Voldar has escaped the ship entirely. Kimar orders Santa and the Earth Children to have a constant guard, certain that Voldar will try something else.
Santa, Billy, and Betty are then brought to meet Bomar and Gimar. Upon meeting Santa, he incites the children into laughter...something that Kimar and Momar have never heard before. After his greeting, Santa requests that a toy factory be built immediately, as he then plans to head back to Earth. It is then that Kimar explains that Santa will not be returning to Earth, and that he now belongs to Mars.
Meanwhile, Voldar has taken into hiding in some caves along Mars' Transverse Canal. He is assisted by a nervous martian named Stobo, and another named Shim. Shim works as a double-agent, investigating Santa's toy factory. Voldar's original plan to kill Santa is dismissed in favor of trying to find a way to discredit him.
Meanwhile, Bomar, Gimar, Billy and Betty assist Santa in working in the toy factory. Momar even makes Santa an extra suit (and fake beard to go with it). Dropo asks to wear it, which is meant with a jovial laugh by Santa, who claims the martian would need to fatten up first.
Back at Kimar's home, Bomar and Gimar have grown much happier, but Billy and Betty have begun to seem sullen, much the way that Bomar and Gimar once were. Momar explains to Kimar that the two should be returned to Earth, but he refuses.
Meanwhile, Droppo has gotten ahold of Santa's extra suit and beard, and after using a pillow, happily decides to go down to the workshop.
Unknown to him, Voldar, Stobo and Shim have arrived there, and attempt to sabotage the machine. As they complete their work, they see Dropo enter, and mistake him for Santa (even though his face and hands are green).
Dropo is taken back to Voldar's lair, but every question he is asked, is answered with 'ho ho ho.'