One Christmas Eve, a baby from an orphanage crawls into Santa Claus's sack and is unwittingly taken back to the North Pole. When the infant is discovered at Santa's workshop, the elves name him Buddy, after his diaper's brand label, and Papa Elf adopts him. Growing up, Buddy believes that he is an elf, but discovers at 30-years-old that he is actually a human. Papa Elf tells Buddy that his birth parents are Walter Hobbs and Susan Wells, the latter having put him up for adoption before her death. Walter now works as a children's book publisher at the Empire State Building in New York City, unaware of Buddy's existence. Buddy travels to New York and finds Walter at his workplace, but Walter mistakes him for a Christmas-gram messenger and has him ejected. Buddy then visits a Gimbels department store and becomes infatuated with a deadpan employee named Jovie. Hearing that Santa will visit the store the following day, Buddy redecorates the store overnight. However, when he realizes that the store's Santa is a man in a costume, he causes a brawl and gets arrested. Walter reluctantly bails Buddy out of jail and takes him for a DNA test, which confirms that he is his son. The doctor speculates that Buddy is trapped in a childlike state of dependency and suggests that Walter take him home to meet his stepmother Emily and half-brother Michael. Walter and Michael are unnerved by Buddy's behavior, but Emily insists that they take care of him until he "recovers" from his current mindset. After Buddy beats a gang of bullies in a snowball fight, Michael forms a bond with him and helps him to ask Jovie out on a date. Meanwhile, Walter's publishing company is struggling after the failure of its latest book. Walter's boss, Fulton Greenway, expects him to have a new book ready by Christmas Eve. Walter and his associates arrange a meeting with ghostwriter Miles Finch, but Buddy disrupts the meeting and inadvertently offends Finch by mistaking him for an elf due to his dwarfism. Finch reacts violently and exits the meeting, causing Walter to angrily disown Buddy. Heartbroken, Buddy writes a letter of apology on an Etch A Sketch and leaves the Hobbs' residence. When Michael informs Walter of Buddy's departure, Walter quits his job to find Buddy. Meanwhile, Buddy meets Santa in Central Park after Santa's sleigh loses its engine and crashes due to waning Christmas spirit. Buddy finds the engine and reunites with Walter and Michael; Walter apologizes for his outburst and accepts him as his son, while Michael reveals the existence of Santa on live television. As Buddy and Santa are chased by Central Park Rangers, Jovie, recalling Buddy's statement that singing can spread Christmas cheer, leads a crowd of people in singing "Santa Claus Is Comin' to Town", generating enough Christmas spirit to power the sleigh without the engine. Walter and Buddy later start an independent publishing company, with their first bestseller being a children's book based on Buddy's exploits. Buddy also marries Jovie and has a daughter with her.
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