Snoopy, one of Santa Claus' brownies, introduces herself to the audience, and explains that it is her job to watch little boys and girls, to see if they are behaving well, and to make sure all the toys Santa gives to children on Christmas are being taken care of. If she finds them broken or forgotten, she hauls them off to the Land of Lost and Forgotten Toys. Snoopy then says Santa asked her to tell all the children the story of how the Fairy Snow Queen gave life to toys, so that they might be more respectful of their gifts. Snoopy then begins the story: one Christmas Eve, long ago, right after Santa and the brownies had finished making the toys, Santa asked the Fairy Snow Queen to come visit so they can have a sugar cookie. The Fairy Snow Queen came, but discovered Santa deeply asleep in his chair, exhausted from his hard work. At his feet, the queen found several of the toys that he was about to deliver: a rag doll, a musical doll, a jack-in-the-box, a toy soldier, a baby doll, a doll dressed as a peasant, and a candy lion. Insulted at being forgotten about, the Fairy Snow Queen decided to play a trick on Santa, and brought the toys to life. As the toys take their first steps, the queen dances with the rag doll, and Santa wakes up. The toys demonstrate they can sing, and while Santa enjoyed their music, he asked the Fairy Snow Queen to revert them to their inanimate state. The queen protested, saying it's all good fun. The toy soldier and baby doll then show everyone a marching routine, after which the mischievous Jack jumps out of his box and frightens the other toys, until he is coaxed back into his dwelling by the toy soldier. The Fairy Snow queen then used her magic to calm everyone down, and Santa asked her once again to put the toys back to normal, before the toys fall in love with each other, or break themselves. The queen then reveals that because she'd been irresponsible with her magic, her powers were taken away. She tells Santa she can only change the toys back if they wish to return to their normal states, and they have no such desire, so she cannot. After this, Santa told the toys that if they don't change back, he won't have any gifts to give to the children. The Fairy Snow Queen then offered a compromise: the toys will come to life for one hour, at midnight, each night. The toys agree to this, and Santa appoints Snoopy the caretaker of all the toys. Before she changed them back, the musical doll and the toy soldier reveal they have fallen in love with each other. In remembrance of her, the soldier gave the doll his golden medal, and Santa decreed all musical dolls will wear golden medals to commemorate their love. The queen returned the toys back to normal, leaving Santa and Snoopy to load the toys onto his sleigh.
