Pee-wee is making his Christmas list for Santa Claus. He asks the viewers what they'd put on his list if they were him. Pee-wee tells Conky what he wants to add to his list. Pee-wee asks to add a yo-yo, but Conky tells Pee-wee he already has one. Pee-wee goes to his toy closet to look. He does have a yo-yo. Pee-wee performs a few yo-yo tricks. Pee-wee goes back to Conky to finish making his Christmas list. Conky wonders if Pee-wee has asked for enough, but Pee-wee says he hasn't, though he doesn't want to be greedy. Conky prints Pee-wee's list as fast as possible. The doorbell rings, and Pee-wee sees Miss Yvonne who happens to have a Christmas gift for Pee-wee. He tells her to come in. Miss Yvonne asks Pee-wee how her new hairdo is, and Pee-wee says to her, "It's really Christmasy." The plant hanging from her hair is mistletoe. Miss Yvonne says that you are suppose to kiss someone when they stand under the mistletoe. Some of the Playhouse friends tell her to stand by them to give them a kiss. Pee-wee asks Miss Yvonne to give him the present first. As Miss Yvonne hands the present to Pee-wee, he wonders what it is because of how heavy it is. Miss Yvonne has given Pee-wee a fruit cake. Pee-wee thanks Miss Yvonne for the gift. Pee-wee gives her a gift in return - perfume. Miss Yvonne says it smells just like Pee-wee, and she thanks him for it. Floory asks Miss Yvonne to stand over him. As Miss Yvonne heads for Floory, Pee-wee goes to the kitchen the put his fruit cake in the refrigerator. As soon as his fruit cake is in the fridge, the picture phone rings. It is Whoopi Goldberg who is calling to ask if she can be on the Christmas special. Pee-wee says he has already scheduled all the guest stars, as well as next year's. But Pee-wee tells her that he can get her on the Christmas special two years from now. Whoopi understands and appreciates that Pee-wee is thinking of her, and she just wants to wish him a merry Christmas.
The Magic Screen tells Pee-wee it's time for a Christmas game of Connect-the-Dots. Inside the screen, the Christmas dots make a sleigh, similar to Santa's. As Pee-wee starts to ride it, he sees Magic Johnson. Magic claims that he and the Magic Screen are cousins. Pee-wee asks if he can give Magic a ride. When both Pee-wee and Magic are on board, a polar bear gives the sleigh a push. They ride up and down the snowy hills until the sleigh goes out of control. Pee-wee jumps out and Magic Johnson says, "Merry Christmas, Pee-wee!" Chairry catches Pee-wee and asks if they can start decorating the Playhouse for Christmas. Pee-wee has forgotten about getting decorations because he has been busy making his Christmas list. Pee-wee says that Christmas is the holiday when we should think about what we can do for other people. He wishes he hasn't been too selfish, and Jambi appears. Pee-wee asks Jambi to conjure up some Christmas decorations for the Playhouse. "Is that what you want to wish for?" Jambi asks. Pee-wee tells Jambi he'd like to use that wish later for something special, and he asks for an extra wish. Jambi is little shocked that Pee-wee wants an extra wish. Jambi agrees and the wish for Christmas decorations is granted.
Mr. Window tells Pee-wee that Reba the mail lady is coming. When Reba walks in, she admires the Playhouse as it is decorated for Christmas. Reba asks Pee-wee how his Christmas special is going, and Pee-wee asks the viewers how they like it so far. Reba has come to deliver some Christmas cards for the Playhouse and to give Pee-wee a gift from. It happens to be a fruit cake. Pee-wee gives Reba his Christmas list, and she asks him how Santa is going to get everything down the chimney. Pee-wee says, "I'm going to have the chimney expanded." Pee-wee has a present for Reba too: press-on nails. Reba wonders why they're so big. "They're toenails," Pee-wee tells her. Reba has something big for Pee-wee. As a big box gets rolled into the Playhouse, Pee-wee hopes it's not another fruit cake. As the box opens, Pee-wee sees Grace Jones. Grace is supposed to see the President in the White House, not Pee-wee in the Playhouse. Since Grace is already here, she asks if she can sing a song. Pee-wee says, "Go ahead. What are you waiting for, Christmas?" Grace sings "The Little Drummer Boy."
Later, Pee-wee is with his guest stars Frankie Avalon and Annette Funicello. They are making Christmas cards with Pterri and Globey. Annette is making cards with a stencil that looks like a Christmas tree. She lays it on the card, dips her toothbrush in green paint, and brushes it on the screen to make the tree. Pee-wee says to Annette, "I hope you remember to wash that toothbrush before you brush your teeth." Frankie is making cards with a potato. He first cuts a candy cane shape out of the potato, dips it in red paint, prints it on paper, and there you have a candy cane card. Annette says to Frankie, "I hope you remember to wash that potato before you eat it." Pee-wee makes Frankie and Annette continue working on their cards. Pee-wee tells them he needs 500 of each by sundown, and he laughs.
Cher comes into the Playhouse to find out what today's secret word is. Pee-wee asks Conky for the secret word: "year." Pee-wee and Cher practice the secret word. Pee-wee thanks Cher for sharing her time with him. The flowers tell Pee-wee the King of Cartoons is coming. After the king wishes everyone happy holidays, he gives a present to Pee-wee. It isn't a fruit cake but two fruit cakes. As the king begins the cartoon, Annette asks him if she can say his line. The king allows her to do just that. Annette says, "Let the cartoon begin." On the television, they see Joan Rivers wishing everyone a merry Christmas. Finally, the Christmas cartoon begins to play.
Billy Baloney tells everyone Pee-wee isn't here. He wants to make it the Billy Baloney Christmas Special. As he begins to sing a song, Pee-wee has come back. Billy tells Pee-wee to go away because he wants to sing. Pee-wee tells Billy to try again next "year." Suddenly, Mr. Kite announces that it has started to snow. Pee-wee runs around the Playhouse all excited telling everybody, "It's snowing, it's snowing!" Pee-wee decides they should go out and play in the snow. Frankie and Annette want to go too, but Pee-wee makes them stay inside since they didn't finish making all the Christmas cards. As soon as Pee-wee is out in the snow, he makes a snow angel. Pee-wee tells the viewers, "If you don't have any snow at home, use 20 pounds of coconut shavings." Now. Pee-wee makes mystery tracks by walking through the snow. Pee-wee hears Cowboy Curtis calling, and Pee-wee plays a trick on him. Curtis follows the tracks wondering where Pee-wee went. Pee-wee appears out of nowhere and surprises him. He has fooled Cowboy Curtis with his mystery tracks in the snow. Just then, they hear the music of the Del Rubio Triplets singing "Winter Wonderland." Pee-wee and Cowboy Curtis make a snowman. Curtis tells Pee-wee, "If you stare at a snowman long enough, he'll come to life." The snowman does come to life, and Pee-wee and Curtis run. Everyone sees Little Richard ice skating. Pee-wee welcomes him as Little Richard slips on the ice and falls. Pee-wee asks Little Richard if he's all right. "I keep on trying again," Little Richard says. After Little Richard falls down again, he decides to quit skating. Pee-wee thinks it looks simple to him. Little Richard asks Pee-wee to try it himself. Everyone is amazed at Pee-wee's skating. Pee-wee explains to Little Richard, "Ice skating is like many things. All it takes is practice."
Back in the warm and cozy Playhouse, Pee-wee and his friends are warming up from being out in the snow by drinking hot chocolate. While having their hot chocolate, they are entertained by K.D. lang singing "Jingle Bell Rock."
Later, Randy asks Pee-wee what he is doing. Pee-wee is hanging up the Christmas stockings, and Pterri tells Randy that Santa Claus is going to fill them with Christmas treats. Randy says there is no such thing as Santa Claus and doesn't believe in him. Pee-wee decides to take down Randy's stocking, but Randy insists on leaving it up just for decoration. Chairry asks Pee-wee where his stocking is, and Pee-wee gets it ready. He wants to be sure that his stocking is big enough for everything on his list. Clocky asks Pee-wee what time it is, and Pee-wee says it's "Christmas time!" It is also time for a Penny cartoon. Penny talks about her Christmas and how she spends it.
Pee-wee asks Frankie and Annette how they are doing with their Christmas cards. They are hungry and thirsty, so Pee-wee gives them bread and water to quench their thirst and satisfy their hunger. Pee-wee then hears the Cowntess coming and tells her, "Merry Christmas." The Cowntess replies, "Moo-ry Christmas." She has a Christmas gift for Pee-wee. Pee-wee guesses it is a fruit cake, and it is. Pee-wee has a gift for the Cowntess: a new musical cowbell that plays "We Wish You a Merry Christmas." The Cowntess is amazed and calls for Zsa Zsa Gabor to see it. Zsa Zsa comes over to Pee-wee to wish him a Merry Christmas.
The picture phone rings, and it is Dinah Shore who has recently recovered from her cold. She sings for Pee-wee "The Twelve Days of Christmas." During her song, someone is on the other line. It is Oprah Winfrey who just wanted to wish Pee-wee "Merry Christmas. After talking to Oprah, Pee-wee continues to listen to Dinah's singing. He puts the phone on call waiting and hears the song outside the booth. Ricardo comes up to Pee-wee and says "Feliz Navidad" ("Merry Christmas" in Spanish) to him. He then tells Pee-wee that children in Mexico celebrate Christmas by breaking the pinata. Pterri has hung a pinata full of toys and sweets from the ceiling. Ricardo makes Pee-wee try to break it open. As Pee-wee swings at the pinata, Charo sings "Feliz Navidad." Charo is so happy to be in the Playhouse. She has made a Christmas dish for Pee-wee: pastel de fruta, or fruit cake. Pee-wee thanks Charo, and she wishes him, in Spanish, a merry Christmas and a happy new "year".
Pee-wee is amazed at how many fruit cakes he has received for Christmas. Mrs. Rene comes by with one more. Pee-wee wishes Mrs. Rene "merry Christmas," but Mrs. Rene says she doesn't celebrate Christmas, as she is Jewish. During the holidays, Jews celebrate Hanukkah, the festival of lights. Since Jews exchange gifts for 8 straight nights, Mrs. Rene gives Pee-wee an additional 7 fruit cakes. Mrs. Rene also gives Pee-wee a dreidel. Pee-wee spins it, and it spins into the Dinosaur Family's hole. They too are Jewish. Later, Frankie and Annette have finally finished making exactly 1,000 Christmas cards (500 by each of them).
Later, Pee-wee and his friends are putting the finishing touches on the Christmas tree. When the tree is finished being decorated, everyone admires it. Just then, the Christmas lights go out. It is Randy who thinks Christmas is too commercial. Pee-wee thinks Randy seems to have forgotten the true meaning of Christmas. The Magic Screen helps Randy out. The true meaning of Christmas is to celebrate the birth of Christ. Randy finally understands what the true meaning is, thanks Pee-wee for straightening him out, and gives him a fruit cake. Cowboy Curtis also has a fruit cake for Pee-wee. Miss Yvonne asks Pee-wee what he'll do with all of his fruit cakes, and he shows everyone what he has done with them. Pee-wee reveals, to everyone's surprise, a new wing to the Playhouse, made entirely of fruit cakes!
While Pee-wee and his friends sing some Christmas carols, Pee-wee hears sleigh bells ringing. He tells everyone to get out the milk and cookies because Santa Claus has come. Pee-wee is excited to see Santa Claus and gives him the milk and cookies. Pee-wee asks Santa if he has brought all the presents on his list, and he has. However, Pee-wee's list was so long, Santa didn't have enough presents for all the other children in the world. Pee-wee asks Santa which presents he wants. Santa wants all of them. Pee-wee thinks about how Christmas is the time of "year" we should think about what we can do for others. Finally, Pee-wee decides to give up all his presents to Santa. Santa wants something else from Pee-wee: his help in delivering all the presents to everyone in the world. Pee-wee is delighted to be Santa's helper and thanks Santa. Pee-wee thanks everyone for coming to his Christmas special. As Pee-wee leaves, Jambi asks him what his special wish is. Pee-wee wishes for peace on earth and that everyone has a very Merry Christmas and a happy new "year".