Kipper goes looking for a Christmas tree. He finds one and takes it home, not realising that it's Mouse's home. On the way home, Kipper runs into Pig and his cousin Arnold. Pig helps Kipper takes his Christmas tree home, with Arnold trying to point out that he has seen the mouse. Kipper and Pig are too busy talking about presents to listen.
When they get home, Arnold sees a present from Kipper. It's a reindeer hat with a flashing nose. Even though Kipper has forgotten to buy the batteries, Arnold doesn't mind. Pig goes home to wrap Kipper's present and Arnold stays behind to 'help' Kipper decorate his tree.
While Kipper goes to look for more decorations for the tree, Arnold spots the mouse and tries to catch it with his hat. The mouse escapes, but Kipper thinks Arnold put his hat on the tree so it could be a decoration.
The doorbell rings. It's Tiger. He's come to give Kipper a present (and to throw a snowball at him). Pig comes, too. His present for Kipper is lumpy, but fortunately, Kipper likes lumpy presents.
Then it's time to go home. Kipper gives Arnold his hat back before he wishes Pig and Tiger "Merry Christmas". Arnold looks in his hat to see if the mouse is still there.
As Kipper leaves out a plate of biscuits for Father Christmas, he tells the viewers that Christmas Eve is best. He pegs a note to his basket telling Father Christmas that he would like anything from him. When Kipper gets into his basket, he tells the viewers that he's not sleepy at all. But he falls asleep anyway.
While Kipper sleeps, the mouse sits on top of the roof and sees a red flashing light (Arnold's hat) from another house. The episode ends with the mouse eating a biscuit he took from Kipper.