It is the time of Christmas in the Smurf Village, and the Smurfs are happily singing the Smurf song as they prepare for the holiday celebration, with the hanging of wreaths and stockings and Christmas ornaments on the big tree in the middle of the village. Harmony is practicing his horn solo, which hurts Smurfette's ears as he plays and makes Grouchy say, "I hate solos". Greedy has a big pot of smurfberry pudding being carried on a sled, but neither he nor Brainy want to hear Harmony play. Trying to find somebody who will listen to his music, Harmony plays for Lazy while he's sleeping and dumps a pile of snow on top of him. Jokey is busy loading up a sled with his Christmas "surprises" for every Smurf, but when Harmony tries to play his solo for Jokey, one of them erupts in his hand. Papa Smurf watches his little Smurfs working together with their Christmas preparations, seeing that they look so happy and saying that this could be the best celebration they will ever have.
Out in the forest, an old man is riding on a sleigh with his two grandchildren, telling them about Santa Claus, who brings children presents every Christmas Eve. The boy asks his grandfather if he thinks Santa Claus is real, and the grandfather says it wouldn't be Christmas Eve without him. As they merrily continue on their way, Gargamel in his castle groans about how miserable Christmas is, knowing that the Smurfs are spreading their love and good cheer on that day. As Azrael accidentally causes a stack of books on the table to fall upon his master, Gargamel finds one of them opened to a page about "Mother's old recipe for making life miserable". He believes he has found the perfect way to destroy those Smurfs through the recipe and laughs at the thought of what he will do to them.
Back in the village, Brainy catches Greedy sneaking a taste of the smurfberry pudding and goes on nagging endlessly to his fellow Smurf until Papa Smurf gets him to stop. Then he tells Greedy that the pudding isn't complete until they add the final ingredient to it, the last walnut -- the one that Greedy had admittedly ate. Though disappointed, Papa Smurf tells Greedy that he will go get another one from a squirrel.
Out in the forest, the grandfather and the two children are happily singing "Jingle Bells" when they are attacked by a fierce wolf, with a man in a purple cloak watching. Meanwhile, Gargamel is busy preparing his mother's recipe, telling Azrael that it isn't complete without the final ingredient, oil of rat wax. No sooner does he add the ingredient, though, that an explosion knocks him to the ceiling, clinging onto a circular lamp until it breaks and he falls back down. Gargamel sobs, not understanding what went wrong, as he has followed all its instructions to the last drop.
While the Smurfs are busy getting another walnut from the squirrel in the forest, the children seek out help for their grandfather, who is buried underneath the wrecked sleigh. They come across Gargamel's castle and ask him if he could help rescue their grandfather. Gargamel asks the children if they have any money, and when they say no, he tells them to go away and shuts the door in their faces. The boy called William sobs, seeing that Gargamel is so mean, and the girl consoles him, saying they will go find someone else to help them. In a chateau near a human village, a man inside fusses that his niece and nephew should have arrived hours ago and tells one of his servants to organize a search party immediately.
As William and his sister called Guinevere continue to look for help, a wolf sniffs out a doll that the young girl has left behind. In Gargamel's castle, the evil wizard is paid a visit by the man in the purple cloak seen earlier, saying that he will give him the power to destroy the Smurfs, but all he wants in return is to find the two children lost in the forest. When Gargamel asks the stranger why, he answers that he wants revenge on the children's uncle who by his good nature would meddle in his affairs, and he will get it by kidnapping the children. He offers the wizard a scroll that will tell him how to find the Smurf Village and what he should do when he gets there, but the stranger won't give him the scroll until he finds the children first.
As Gargamel goes out into the forest to find the children, he comes across their uncle who is also out looking for them. He asks Gargamel if he's seen them, saying that their grandfather is all right, and is offering ten gold coins for their safe return. This makes Gargamel happy, seeing that he can get a reward for finding the children and get his hands on the Smurfs. After the uncle and his team of men depart, Gargamel and Azrael continue on their way.
Near a tree, William and Guinevere huddle close together to keep themselves warm and to comfort one another so that they wouldn't be scared being all alone in the forest. Guinevere sings "Silent Night, Holy Night", which attracts the attention of both the wolves in the forest looking for them and a group of Smurfs who were just passing through on their way home. However, the wolves find them first and were ready to attack the children when Papa Smurf intervenes, warning the wolves that the children are their friends. William thinks that Santa Claus has come, and after the wolves depart, Guinevere tells him and the other Smurfs about their grandfather. Papa Smurf tells Hefty, Brainy, and Clumsy to find the grandfather's sleigh, then tells Smurfette to go back to the village to get help for the children. He stays with William and Guinevere, finding himself a little uncomfortable answering the boy's question if he was Santa Claus.
Hefty, Brainy, and Clumsy find the overturned sleigh, but they see no trace of the grandfather who was buried underneath it, though they do see human footprints nearby. Clumsy spots a message nailed to the sleigh, which was left by the children's uncle Edgar, telling the children that their grandfather is all right and to stay with the sleigh. After Brainy reads it, he sees that the message wasn't written for them. But Hefty and Clumsy know who it was written for, and so return to Papa Smurf.
As Gargamel continues his search for the children in the forest, they are being cared for by the Smurfs in the village as they allow William and Guinevere to eat of the smurfberry pudding, which makes Greedy mournful that he hasn't had one bite of. William says he couldn't wait to tell their grandfather that they have met Santa Claus, who in reality is Papa Smurf, who offers the children presents in addition to his hospitality. Then Hefty, Brainy, and Clumsy show up, telling Papa Smurf and the children that they have found the sleigh and the note left from their uncle. Papa Smurf sees that it's good news, but when William asks if they can finish opening their presents first, he tells them that they can open all their presents. He then leads his little Smurfs into a song that they sing every Christmas, "Goodness Makes The Badness Go Away", which the children also sing along to.
Returning to the spot of the wrecked sleigh with the children in high spirits, Papa Smurf tells his little Smurfs that they're going to need a huge signal fire. But then Gargamel drops in from the tree he was watching the Smurfs in, taking the two children away while Azrael gives chase to the Smurfs until his master calls for him, saying they will deal with the Smurfs later. Smurfette wonders what Gargamel wants with the children, and Papa Smurf says that he doesn't know, but the evil wizard is up to no good and that they must go after him.
In Gargamel's castle, the stranger again shows up, asking about the children, which Gargamel then turns over to the man in the purple cloak. The Smurfs watch from a window as the evil wizard makes the exchange for the promised scroll, with Papa Smurf noticing something about the stranger. Gargamel is so happy to get the scroll with which he can destroy the Smurfs that he immediately heads for Smurf Village as the stranger takes the children away. Vanity wonders what they are going to do about their village, but Papa Smurf tells him that rescuing the children from the stranger comes first. Upon reaching the village, however, Gargamel is disappointed to find out that there are no Smurfs left in it, but he decides to go ahead with reciting the incantation on the scroll. As the incantation is said, things in the village wither away until everything in it is left in ruins. After the scroll vaporizes, Gargamel cackles in glee, seeing that the Smurfs will be homeless and miserable this year, then he goes back into the forest to collect his ten pieces of gold.
Meeting with Edgar and his men at the wrecked sleigh, Gargamel is asked about the welfare of the children, and Gargamel answers that he has seen the man with the purple cloak take the children away. Edgar sets off to find that man, but when Gargamel asks about the payment, Edgar answers he will pay him only when the children are found, bumming Gargamel. Then the stranger shows up, telling Gargamel that a contract is a contract and that he has broken his part of it. Gargamel is rather fearful when the stranger says the wizard will now come with him, and when Gargamel and Azrael back away from the stranger, they find a tree behind them has been turned into a bunch of snakes by the stranger, forcing them to surrender.
Tracker leads the Smurfs onto a trail of human tracks and cat paw prints that were made in the snow, which means that the stranger now has the children as well as Gargamel and Azrael in his clutches. In an open barren field, the stranger is ready to take his captives on what he calls "their final journey" and surrounds them with a ring of fire to prevent their escape while he summons a portal that will take them all back to his home. The scene is so frightful that even Gargamel is on his knees begging for mercy. The Smurfs, who have found the ritual starting, wonder what they can do to combat such evil. Papa Smurf says there is one power that can overcome it, the power of love, and so he directs his little Smurfs into singing "Goodness Makes The Badness Go Away", singing it loudly enough so that the children could hear and sing along. The stranger is getting upset by the singing and warns the Smurfs that they're dealing with a power they know nothing about. But the singing continues, which makes the flames surrounding the captives grow higher, and even Gargamel is found singing along with the Smurfs. Eventually this overpowers the stranger to the point where his wall of fire disappears and so also does he.
As the Smurfs cheer for the victory they have over the stranger, William and Guinevere hear their uncle and grandfather calling for them. They turn to see that their grandfather is all right and safe, riding in their uncle's sleigh. But Gargamel is now demanding for his payment, seeing that he has helped rescue the children, which William refutes by saying that he was mean to them. As Edgar looks rather threatening toward Gargamel for putting his niece and nephew in danger, Guinevere says not to hurt the evil wizard because Christmas is a time for forgiving, even the likes of him. After Gargamel fearfully departs, William and Guinevere tell their uncle that they have met Santa Claus, which makes him laugh in wonder. As they ride off, the children wave goodbye to the Smurfs whom they see are hiding on a precipice.
Upon their return to the village, the Smurfs are all huddled around outside in blankets, looking at the devastation that was left behind by Gargamel. Papa Smurf says that while they don't have all the nice things about Christmas or even the comfort of warm beds, what they do have is each other, which most of the Smurfs can agree with. Harmony offers to play his solo, and as he does, something miraculous happens: the tree lights up, fully restored, and so also does the village. Papa Smurf is not sure how that could happen, but he is sure that anything can happen on Christmas.
- This is one of the few times in a Smurf-related production that Papa Smurf is referred to as Santa Claus due to the visual similarity between the two characters. The second time was in "'Tis The Season To Be Smurfy", while the third time is in the 2011 Smurfs movie where Patrick Winslow calls Papa Smurf "the little blue Santa man".
- This is one of the mainstream media Smurf stories that invoke the Exposed To The Elements trope mentioned on TV Tropes, as the Smurfs hardly wear anything heavier than a scarf to protect themselves from the wintry weather.
- A children's book adaption of this special was released internationally, titled "A Christmas Miracle". It is one of few Smurfs Classic books that have not yet been released in the US.
- Warner Home Video released the special on The Smurfs Holiday Celebration for North America.
- Fabulous Films released the special on The Smurfs: The Complete Second Season and The Smurfs: 'Tis The Season To Be Smurfy for the United Kingdom.
- Magna Home Entertainment released the special on Smurfs: Just Smurfy 2 , The Smurfs: Complete Season 2 and Smurfs: Specials Collection for Australia and New Zealand.
- Sony Pictures Home Entertainment released the German version of the special on Die Schlumpfe: Die Komplette Zweite Staffel DVD set for Germany.
- Universum Film GmbH released the German version of the special on Die Schlumpfe: DVD Collection 3 box set for Germany in 2006.
- The Special would be referenced in 1989's 'The Simpsons Christmas Special' (a.k.a. Simpsons Roasting On An Open Fire) during Bart Simpson's comment about Christmas miracles: "Come on, Dad, if TV has taught me anything, it's that miracles always happen to poor kids at Christmas. It happened to Tiny Tim, it happened to Charlie Brown, it happened to the Smurfs, and it's gonna happen to us."
- This special was storyboarded by Ron Campbell.
- John Kricfalusi, Lynne Naylor and Jim Gomez (the future crew members of Ren and Stimpy) worked as layout artists on this special. As a result, more emotive expressions and dynamic poses can be spotty at best (such as the scenes with Gargamel and Azrael).
- In the first version of the Polish dub when Gargamel hands over over the kids to The Christmas Stranger, the stranger tells him that the scroll will not only destroy the Smurf Village, but also it will tell Gargamel where it's located. This was fixed in the redub.