On the planet Mars, the Martian supreme leader Lord Kimar notices a listlessness that seems to be taking ahold of the children of Mars. This is clearly evident when he finds his own children (Bomar and Girmar) spending much time watching Earth based programs on the videoscope. Kimar's wife, Lady Momar, suggests that he seek advice from Chochem, the Ancient One.Lord Kimar gathers a number of other Martians and goes to see the 800-year-old sage 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.Lord Kimar soon 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 Santas, many of whom are standing on corners ringing bells. Kimar believes that once they capture the real Santa, they then won't have any trouble with hundreds of Santas 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 children with them, to prevent them from informing the authorities. On the Martian spaceship, 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 Torg, who captures them. The children are returned to the ship shortly thereafter.Torg and the Martians then head to Santa's workshop. Upon finding others there, Voldar and another Martian use a freeze-ray weapon, 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 attempt and capture the Martians, but it's too late as the ship is too far away.On the Martians' spaceship, Santa's jolly spirit infects many of the crew, but Voldar finds the entire cheeriness ridiculous, and attempts to shoot Santa and the children 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 attempt 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 shoot Santa is dismissed in favor of an attempt to find a way to discredit him.Meanwhile, Bomar, Gimar, Billy and Betty assist Santa on 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, Dropo 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 Santa's famous 'ho ho ho'.When Santa and the children return to the factory to make more toys, they discovered that someone has tampered with the machines. Voldar and Stobo return to the factory to make a deal with Kimar, but when they see the real Santa Claus, they realize that their plan has been foiled. Held hostage in the cave, Dropo tricks his guard Shim and escapes. Kimar then arrests Voldar, Stobo and Shim. Santa notices that Dropo behaves like him, and says that Dropo would make a good Santa Claus on Mars. Kimar agrees and sends Santa and the children back to Earth.