Marie, Fritz, Drosselmeyer's nephew, and the Prince are played by actual pre-teenage children in this production, as are all of the other children. However, most of the actual dancing is performed by adults.
It is Christmas Eve. A Christmas party is to be held in the home of Town Council President Stahlbaum and his wife. Their young children Marie and Fritz cannot wait to enter the living room and see the Christmas tree for the first time. Finally they are ushered in, all the guests arrive, and the party begins.
Suddenly Drosselmeyer , Marie's godfather, enters with his young nephew, who is Marie's age. Drosselmeyer performs several magic tricks and then shows the children the wondrous life-size dancing toys he has brought, including a Harlequin and a Columbine. The toys dance and the children are delighted. Then Drosselmeyer produces a smaller gift, a Nutcracker made in the style of an old man. Marie is enchanted with the toy and claims it as her own, but her bratty brother Fritz snatches the Nutcracker away from her and deliberately breaks it out of jealousy. Marie is heartbroken, but Drosselmeyer comforts her. When Drosselmeyer's nephew brings Marie the doll bed so that she can place her broken Nutcracker in it, it becomes obvious that Marie is deeply touched, and that she and the nephew will become good friends. The party ends with the "Grandfather Waltz". The guests leave and Marie and Fritz go to bed.
But Marie cannot sleep. She creeps downstairs, picks up the Nutcracker, and falls asleep with it on the sofa. Marie's mother enters and lovingly covers the girl with a blanket. Then Drosselmeyer appears, but we're never sure if this is a dream or not. He picks up the Nutcracker and repairs it, then he leaves.
Marie awakens to see life-size mice invading the living room. The Christmas tree magically grows to giant size, as does the doll bed, and the toys come to life, including the Nutcracker, whom Marie awakens just as one would awaken a sleeping parent. The Nutcracker grabs his sword and joins the battle. He fights a duel with the Mouse King, and just as it seems that he is about to lose, Marie throws her slipper at the Mouse King, killing him, and faints.
The dollhouse bed on which Marie has fallen in a faint then begins to move by itself as if by magic. The Nutcracker leaves and the bed finds its way into a snow-covered forest. The Nutcracker returns and suddenly turns into a boy Prince, who looks just like Drosselmeyer's nephew. He had been turned into a nutcracker by the evil Mouse King, and only by the King's death could the Nutcracker regain his human form. He goes to the dead Mouse King and with his sword cuts the crown off the King's head. Holding the crown, he goes to Marie, awakens her, and places the crown on her head. Hand in hand, the two walk off into the forest.
The falling snowflakes now assume human form and come to life. They dance the "Snowflake Waltz". Marie and the Prince appear and walk hand in hand toward a star which resembles the Christmas star, as Act I of the ballet ends.
In Act II, Marie and the Prince arrive at the Kingdom of Sweets, ruled by the Sugar Plum Fairy. The Prince explains to her what has happened in pantomime. In honor of Marie's bravery, a series of dances is performed by living candies - the Spanish Dance, the Arabian Dance, the Chinese Dance, the Trepak (Russian Dance), the Dance of the Reed Flutes, the Dance of the Clowns (performed by the giant skirted Mother Ginger and her children), and the Waltz of the Flowers. Then the Sugar Plum Fairy and her Cavalier perform a Pas de Deux containing the beautiful Adagio. As the festivities end, the Sugar Plum Fairy kisses Marie goodbye, the Prince bows to the Fairy, and he and Marie fly off in a reindeer drawn sleigh as everyone waves goodbye. It is never explained in this version whether the fantasy events were a dream or not, but we may presume they were real.