Frosty the Snowman travels to the town of Evergreen, which is seemingly idyllic but full of unhappy children who must follow harsh rules. Frosty tries to play with the mayor's son Tommy Tinkerton, but he is afraid of displeasing his upbeat father, who keeps the family and the town on a strict schedule and favors Tommy's obedient older brother Charlie. Seeing he cannot reach Tommy yet, Frosty finds Tommy's best friend and neighbor, a nervous boy named Walter Wader, and convinces him to play in the snow with him one night. Walter has so much fun that he walks into school confidently the next day. Word spreads about Walter breaking curfew and having fun, prompting Principal Pankley to complain to Mr. Tinkerton. Walter gets into a food fight with Charlie at lunch, prompting Pankley to place the two in detention. Tinkerton takes a pin marked "#1" from Charlie and interrogates Walter, who replies that he was "playing with a magical snowman", causing Tinkerton to react nervously. Pankley assures Tinkerton that Walter's story is untrue, secretly desiring to take Tinkerton's job as mayor. As school ends, Charlie mocks Walter for believing in Frosty, but Frosty arrives outside the school and the two join him. Tommy leaves to follow Sara Simple, a schoolmate he has a crush on, but instead Frosty's hat leads him to the library, where he discovers a comic book about Frosty. The comic tells of a boy whose father is a stage magician who denounces magic, yet the boy brings Frosty to life using his father's hat. Tommy reads that the boy spends the rest of winter looking for Frosty, but the rest of the comic's pages are blank. An increasingly disturbed Tinkerton finds Tommy and gives him the "#1" pin, confessing that Charlie and the other children have told him the same story about a magic snowman and wanting Tommy to tell him if anything else strange happens. Tommy wears the pin to school but is shunned for being Tinkerton's new favorite. Tommy discovers his mother scrapbooking old photos of his father, revealing that the boy in the comic is Tinkerton. Frosty continues to play with the children, including Sara, until they begin disobeying rules, appalling their parents and causing Tinkerton to break down. Pankley convinces Tinkerton to make him mayor at the next town meeting, promising to restore order. He also notices Walter feeling left out of playing with Frosty and tricks him into helping him lay a trap for Frosty. Walter goes ice skating with Frosty on a frozen pond until Frosty falls through the ice and liquifies, allowing Pankley to steal the hat. While Tommy is trying to read the comic, the blank pages restore themselves. Pankley is revealed to have stolen the hat and locked it away the same winter Tinkerton was looking for Frosty, warning that Pankley will take over Evergreen completely if he is allowed to succeed. Tommy regains the trust of his friends when he shows them the complete comic, and they successfully retrieve the hat from the school and revive Frosty. The adults notice their children's absences and head into the woods to find them dancing with Frosty despite Pankley's attempts to stop them. Tommy returns the "#1" pin to Tinkerton, apologizing for disobeying him, but Tinkerton assures his son he did the right thing and happily recognizes Frosty and his father's hat. Realizing Pankley's treachery, Tinkerton takes his position as mayor back and Walter hits him with a snowball, leading Frosty to involve the other adults in a snowball fight. The adults reconcile with the children and Tinkerton comes to believe in magic again, not wanting his sons to grow up without magic as he did. The film's narrator is revealed to be an elderly Tommy who now lives together with Sara, hearing her call him home from the cold.
The film holds only a loose continuity with the original special, 1969's Frosty the Snowman. There is no mention of Christmas, although the show does mention Santa Claus. However, it has more continuity with the original than the previous Frosty special in 1992 by CBS, Frosty Returns. The film originally aired annually on Cartoon Network from 2005 until December 11, 2011 when the special moved to Kids & Teens TV, which ceased operations in 2019. Following this, the special was acquired by AMC as part of their Best Christmas Ever event. Distribution rights to the film are currently held by NBCUniversal Television Distribution following its parent Comcast's acquisition of DreamWorks Animation, which acquired the film's holder ClassicMedia in 2012.
