The story follows a teenage Ralphie Parker, now on the cusp of attending college, who dreams of owning a 1939 Mercury Eight convertible—the ultimate status symbol of adolescence. As Christmas approaches, Ralphie accidentally causes significant damage to the coveted car at a dealership. Desperate to set things right before his hyperbole-prone father finds out and his dreams of vehicular ownership are dashed, Ralphie concocts a plan with his loyal friends Schwartz and Flick to earn enough money to fix the car. They take up a series of odd jobs, each job proving both humorous and chaotic, as they navigate their way through an often unpredictable holiday season.

The subplot features Ralphie's younger brother Randy dealing with his own set of Christmastime dilemmas, while his parents juggle holiday preparations with the usual Parker family antics. The ensuing adventures include some adolescent misadventures, seasonal festivities, and valuable lessons about responsibility and family. Balancing humor and heart, the movie captures the spirit of the holiday season in a nostalgic, coming-of-age style, building up to a festive climax as Christmas Day draws near.