When people are not around, toys come to life to play, but they must be careful because if a person catches them out of position, they will be frozen forever. On Christmas Eve, Rugby the Tiger remembers that he was last year's favorite Christmas toy and wants to keep that position rather than be replaced by another toy. However, he does not realize that if Jamie were to unwrap him again, she would see him out of his normal place and he would freeze. Mew, the cat's toy mouse, follows him out of the playroom to help him after informing the other toys that he has left.
Apple the Doll, whom Rugby had replaced as favorite toy, leads a group of toys out of the playroom to rescue him. Once they meet up with him in the living room, Apple tries to tell him what Christmas is truly about, but Rugby refuses to believe her. As he tries to get into the Christmas package, he releases Meteora, Queen of the Asteroids, who is unaware that she is a toy and thinks that she has landed among aliens. The other toys hurry to get Rugby out of the box and Meteora back in before they are found and frozen forever.
However, after Mew is caught and frozen, Rugby realizes what a good friend Mew has been to him and how he had been acting selfishly. Rugby sings, telling Mew how much he cares for him. This brings Mew back to life, and the toys revive their frozen friends.