In response to a letter from Ms. Pamela Parfrey – Headmistress of the Buena Loa Mission – McHale and the guys are busily preparing some Christmas surprises for the children of the Mission. The children have placed some tough orders, and some of the gifts must be improvised, Such as: A surf board, for a sled, and a piglet for a puppy.
McHale has the operation all carefully planned out. He and Tinker – As Santa Claus, and Jack Frost – Will parachute onto the island with the smaller gifts, and Parker and the rest of the Crew – Dressed as Santa's brownies – Will arrive, later, on the 73, with the larger gifts, and the turkey dinners.
Later, in Binghamton's office, Binghamton is pretty upset that the main course for Christmas dinner is 'breast of chipped beef'. He knows, of course, that McHale and his bunch have stolen his birds, and orders Carpenter to secure a boat, for a trip over to McHale's island, to confront McHale about the theft. Just as Carpenter leaves the office, Barney Skyler (Joe Finnigan) – Correspondent for The United Press – Arrives, and, after Binghamton explains the situation to him, Skyler – Hungry for a story – Accompanies Binghamton, as he leaves for McHale's island.
Meanwhile, Parker and the rest of the crew have dressed in their brownie costumes, and have done quite an elaborate job of decorating the 73. Parker lines his brownies up for inspection, and soon, McHale, in his Santa Claus outfit, arrives to look them over. After showing his approval, 'Santa' and Tinker, in his Jack Frost outfit, leave for the seaplane, for the trip to Buena Loa. As the plane takes off, it cruises directly over Binghamton's motor launch, giving Binghamton, Skyler, and Carpenter somewhat of a scare.
Parker and The Boys are about to shove off, when Happy rushes in with a box of shaved ice, from the base ice house.
"I figure what's Christmas, without snow?!" Happy says, excitedly.
Parker doesn't like the idea, at first, but, when he sees that the ice makes good snowballs, he makes one up, and tosses it out toward the ocean.
Meanwhile, on Binghamton's boat, an angry Binghamton says:
"I tell you, Mister Skyler, the day I can laugh, and forget about this, it'll be a cold day in July!"
Just then, Parker's snowball splatters onto the visor of Binghamton's cap. Puzzled, of course, as to why he should get hit with a snowball, in the South Pacific, Binghamton stares angrily toward McHale's island, and quickly gets the idea that McHale and his Crew are somehow behind it.
Binghamton's boat soon pulls up to McHale's dock, and Parker and The Boys snap to, when Binghamton steps over, with Skyler. Binghamton, of course, wants an explanation for the way they're dressed, and, after Parker stammers out an answer, Binghamton catches the aroma of roast turkey in the air, which provides him with all the evidence he needs. Again, he threatens Court Martial, but, before he can place the 73 Crew under arrest, Skyler asks to hear their side of the story. Parker then explains the entire plan to Binghamton, in his own, inimitable way.
Skyler loves the 'human angle' of the story, and, when the guys begin to butter Binghamton up, by telling him about all the good publicity he'll get from helping some poor orphans, stranded in the war-torn South Pacific, Binghamton is sold. He even poses for a photo, as he climbs aboard the 73, for the trip to Buena Loa.
Back on Buena Loa, Ms. Parfrey (Anna Lee) is putting the finishing touches on a palm Christmas tree, when Tani – A young Asian orphan girl (Cherylene Lee) – Runs in with the news that Santa Claus has arrived. Tani excitedly relates the news that Santa is dressed differently, this year, in a brown suit, and she adds that he's carrying a sword, and a flag with a big, red bow on it. Ms. Parfrey knows that it's not Santa Claus that Tani has seen, and frantically orders Tani to assemble the children, and get them to the motor launch, immediately.
Meanwhile, 'Santa' McHale, and 'Jack Frost' Tinker, are flying over Buena Loa in the seaplane. The Co-Pilot (Thomas Bellin) informs them that it's time to jump, and McHale goes first. The Co-Pilot then shoves a reluctant Tinker out the door of the plane.
Once on the ground, McHale and Tinker don't see the children, immediately. But, Tinker hears a rustling in the brush, nearby, and, thinking that it might be the children, he and McHale step toward the noise. But, the point of a bayonet soon tells them that they've landed in the middle of the Japanese patrol.
Santa and Jack are taken to the mission hut, and held under guard by some Japanese soldiers. Tinker whispers that he hopes that the children are safe, and McHale returns that he'd noticed that Ms. Parfrey's boat was gone, meaning that they have probably moved to a place of safety.
McHale suddenly comes up with an idea, and puts it into action, as soon as the Japanese Commander enters. The Commander - A Major Shimura (Yuki Shimoda) – Orders them to stand, and McHale begins by insinuating that Shimura and his men are their prisoners, rather than the other way around.
"What this all about?!" says Shimura. "What-what-what-what?!!"
"There's one in every outfit." Says Tinker, lowly, to McHale.
McHale frustrates Shimura further, by adding that – Since it's Christmas Day – They've brought gifts for their prisoners. McHale and Tinker then step over, grab their gift bags, and dump their contents onto the table. The Jap soldiers excitedly come over to look them over, and Shimura is particularly interested in a jack-in-the-box, which gives him quite a start, when it pops out of it's box.
McHale then calmly informs the Major that – As soon as the gifts are distributed to his men, they will all sit down, like Officers and gentlemen, and discuss the terms of the Major's surrender. But, Shimura will have none of it, and angrily informs McHale that there is an entire company of Japanese soldiers on the island. But, McHale returns that he's well aware of that, thanks to U.S. Naval Intelligence. He then tells the Major that – This being Christmas Day – All POWs will be served a turkey dinner. But, Shimura still doesn't buy it, so McHale tells Shimura that perhaps he'll be convinced, when the brownies arrive, with their turkey dinners.
Just then, the sound of 'Jingle Bells' is heard, as the 73 arrives. McHale and Tinker follow the Major, as he rushes out. Shimura takes a look, through binoculars, and sees The 73 pulling up to the beach.
"What's going on here?!" says Shimura, turning to McHale. "What-what-what?!! You trying to pull some psychological warfare?!"
McHale reiterates that it's his 'brownies', having delivered the turkey dinners. He gives Shimura a chance to surrender, but the Major still won't budge, and angrily orders McHale to go out, and tell his 'brownies' to prepare for surrender.
McHale goes out to meet the boat, and is a bit surprised to see that Skyler and Binghamton have come along. McHale discreetly informs them that they've stepped into an ambush, but adds that he's working on a plan. As the Japs make their presence known, McHale orders Parker to bring the turkeys, and tells everyone to play it cool, and smile.
As Parker, Binghamton, Skyler, and the rest of the Crew gather on the beach, McHale explains to them that he's informed the Major and his men that they are prisoners of war, and that, as soon as they've had their turkey dinners, they will be transported to a POW camp. McHale then orders his Crew to start singing, and Parker leads them in a chorus of 'Jingle Bells', in the key of 'C'. But this only infuriates the Major more, and he angrily orders them to stop singing. McHale then steps over to Shimura, and the Major expresses his anger, in Japanese.
"Well, if that's your attitude," says McHale, "I'm gonna take the turkeys right back to the Officer's mess."
Shimura shouts another angry Japanese phrase, and McHale steps back to his Crew, taking Tinker with him. Parker then orders the guys to load the turkeys back onto the boat, but the point of Shimura's sword in his back, quickly changes his mind.
Shimura is beginning to see through McHale's plan. He points out the fact that McHale and his men have no ship, no plane, no support of any kind, and orders his troops to take McHale and his group to the stockade.
Meanwhile, Ms. Parfrey and the children have been rescued by the Crew of a British destroyer, which now cruises off the coast of Buena Loa. Ms. Parfrey and 2 British Officers stand on the deck of the cruiser, watching the scene on the island.
"Such crass impertinence!" says the British Commander, while the other Officer watches the island, through binoculars. "Starting a flap on Christmas Day! No sense of ethics, at all!"
Ms. Parfrey then expresses her hope that their Mission won't be destroyed, but the Commander (Noel Drayton) assures her that that won't be necessary.
"We'll just fire a few shots over their heads…" he says, "…And drive the blighters back into the sea."
Back on the island, McHale gives Shimura – Whom he calls 'Seymour' – One more chance to surrender. But the Major steadfastly refuses. Then, just as Shimura orders them to get moving, the British ship begins firing. Everyone ducks, and, when the smoke clears…
"Merry Christmas, one and all!" says a smiling Major Shimura, suddenly in the Christmas spirit. "Merry Christmas! Merry Christmas!"
With this, McHale looks skyward, and says…
"There is a Santa Claus!"
McHale then calmly orders his 'brownies' to disarm the Japs.
Later, at the big Christmas party, at the mission, the children are all happily opening their gifts from 'Santa' McHale, and his crew of 'brownies'. Tani is chasing her 'puppy', Gruber is dealing a hand of poker to some of the kids, Parker is showing one of the boys how to make a snowball, and everyone is generally having a good time.
Ms. Parfrey steps over to 'Santa', and gives him a kiss – Without the mistletoe – As a 'thank you', for coming through for the children. A bashful Santa then gives Ms. Parfrey her Christmas gift, and, as Binghamton and Skyler step over, Santa makes it clear that none of it would have been possible, without Captain Binghamton.
Skyler, notebook in hand, is ready to take notes on this great human interest story, but Binghamton insists that McHale get all the credit for the entire operation, and adds, in so many words, that he intends to have McHale up on charges for the theft of the turkeys, and the unauthorized use of Navy fuel and equipment.
Just then, a snowball splatters directly on Binghamton's left ear. Parker steps in, excited about how well his young student had thrown it, and, as McHale and Ms. Parfrey get a good laugh, Parker realizes that the victim was Binghamton. Parker then tries to soften the situation, by leading everyone in a chorus of 'Jingle Bells'.