After inadvertently wreaking havoc on the elf community due to his ungainly size, a man raised as an elf at the North Pole is sent to the U.S. in search of his true identity.
Buddy was a baby in an orphanage who stowed away in Santa's sack and ended up at the North Pole. Later, as an adult human who happened to be raised by elves, Santa allows him to go to New York City to find his birth father, Walter Hobbs. Hobbs, on Santa's naughty list for being a heartless jerk, had no idea that Buddy was even born. Buddy, meanwhile, experiences the delights of New York City (and human culture) as only an elf can. When Walter's relationship with Buddy interferes with his job, he is forced to reevaluate his priorities.
- Thirty years prior to the events of the film, a baby crawls into Santa's sack at an orphanage. Santa unwittingly takes the baby back to the North Pole, where it is decided that Papa Elf will raise him. The baby, named Buddy, is raised unaware that he is actually a human, until his enormous size and poor toy-making abilities cause Papa Elf to tell him the truth. The old elf reveals that Buddy was born to Walter Hobbs and Susan Wells and placed up for adoption, that Walter never knew Buddy was born, and that he now works at a children's book company in New York. From Santa, Buddy learns that his father is also on the naughty list; nevertheless, Buddy sets out for New York to find his father.
Once in the city, Buddy displays his naïveté in several ways, as he crosses the street at the wrong time, chews discarded gum on the street, and takes a coffee shop's claim to have the "world's best cup of coffee" literally. Buddy eventually finds his father in the Empire State Building, but an incredulous Walter Hobbs has him thrown out. Buddy takes a security guard's sarcastic suggestion to "get back to Gimbel's," where he is mistaken for an employee and meets the lovely but unenthusiastic Jovie. The next morning, Buddy is shocked to discover that Gimbel's Santa is not the genuine article, and a fight ensues between them. Buddy is arrested and Walter reluctantly bails him out and takes him to a pediatrician for a DNA test. Once it is proven that Buddy is in fact Walter's son, he takes Buddy home to meet his wife Emily and son Michael. Walter is clearly put off by Buddy's immature, innocent behavior (he slathers his pasta with maple syrup and can't seem to understand that Walter isn't interested in playing with him), but Emily insists that they take care of Buddy until he "recovers."
Buddy befriends Michael after the former defeats a gang of bullies single-handedly in a snowball fight, and Michael encourages Buddy to ask Jovie out. The next day, Walter reluctantly takes Buddy to work with him, and uses Buddy's naïveté to send him down to the mailroom. Buddy gets drunk on a coworker's whiskey, thinking it's syrup, and ends up throwing a party in the mailroom. That night, Buddy has a successful date with Jovie. Walter, meanwhile, has been trying to save his floundering business by hiring the temperamental best-selling writer Miles Finch. When the vertically-challenged Finch arrives, Buddy mistakes him for an elf. The offended Finch attacks Buddy and storms out of the conference room without signing a deal with Walter's company. Walter is so upset over this setback that he screams at Buddy to "get the Hell out of my life." A deeply hurt Buddy roams New York that night (Christmas Eve), until he looks up and sees Santa's sleigh crash in Central Park. He finds Santa, who explains that he'd lost the sleigh's engine and that the last bit of Christmas spirit (which had powered the sleigh previously) had gone. Santa convinces Buddy to help him fix the sleigh.
Michael, meanwhile, bursts in on Walter's board meeting to tell him frantically that Buddy has gone. He manages to convince Walter to put his family above his job for the first time, and the two find Buddy in Central Park as he locates the sleigh's engine. Buddy takes them to meet Santa, who reveals to Michael that belief in Santa (manifested in knowing that Santa is bringing people what they want for Christmas) can make his sleigh fly. Michael therefore steals Santa's list and reads it in front of the TV cameras now gathered outside Central Park, so that people all across New York believe conclusively in Santa. The Central Park Rangers begin to chase Santa's sleigh while Buddy is still trying to reattach the engine, and eventually the engine is lost. However, Jovie (remembering that Buddy had told her "The best way to spread Christmas cheer is singing loud for all to hear"), manages to overcome her shyness and get the sleigh in the air by the power of Christmas spirit when she leads the crowd in singing "Santa Claus is Comin' to Town," with even Walter eventually joining in. In the epilogue, Papa Elf explains that Walter started his own publishing company, and the first book released was Buddy's own account of his adventures. Papa Elf also reveals that Buddy and Jovie married and had a daughter named Susie, and that they visit the North Pole periodically.