It's Christmas time, and Patchy the Pirate is telling the story of how Spongebob first brought Christmas to Bikini Bottom. Spongebob is sneaking up to Sandy's tree dome to perform is new karate move, and sees Sandy lighting up her tree to look like a Christmas tree. Spongebob, mistaking the lights for fire, freaks out and runs in and splashes water on Sandy. An annoyed Sandy realizes that Spongebob's never seen a Christmas tree. Confused, Spongebob asks what Christmas is, and Sandy tells Spongebob about Santa Claus, decorating, giving and receiving presents, and all of that other Christmas etc. Spongebob hurries to the Krusty Krab afterwards and tells Mr. Krabs, Patrick, and Squidward all about what he's learned. Spongebob spreads Christmas all over Bikini Bottom, telling how you can write to Santa, and he'll give you what you want. Then everyone in Bikini Bottom writes their wish of what they want to Santa, and Spongebob uses a machine to shoot the letters up to the ocean surface. However, one certain grinch, Squidward, refuses to take part in this merriment. While everyone decorates and writes letters to Santa, Squidward refuses to believe in Santa and all the Christmas cheer. On Christmas Eve, everyone waits outside singing for Santa, while Squidward goes to sleep. The next morning, Santa never came, and everyone gets mad at Spongebob for filling their heads with fairy-tales and leaves Spongebob. Spongebob, heartbroken, is only made worse when Squidward comes out and makes fun and taunts Spongebob about Santa. Spongebob gives Squidward a present that he would've given him so he wouldn't feel left out if Santa came. Squidward unwraps the present to find a carved wooden clarinet, hand-made by Spongebob. Squidward is touched and feels like a jerk. Spongebob, still sad, starts to undecorate, when he hears, "HO! HO! HO!". Squidward, feeling bad for Spongebob, appears dressed as Santa Clause. Spongebob freaks out and gets all excited, Santa tells Spongebob that he brought Christmas to Bikini Bottom by telling them about it, which makes Spongebob faint with happiness. Squidward is ready to take the suit off, when all the fish of Bikini Bottom appear, asking for presents. Squidward runs in and out of his house giving all the fish his belongings to make Spongebob and them happy, and sharing Christmas spirit. When it's all over, Squidward has nothing left and takes off the suit, and Spongebob appears to him telling him everything he missed, and Squidward pushes Spongebob away. That's when Squidward finds a note at his doorstep. It's a note from Santa! The note thanks Squidward for helping him spread joy, and tells him he's been a good boy this year. Squidward then looks up to see the real Santa in his sleigh flying out of Bikini Bottom, laughing with joy. Shocked, Squidward just tells himself he's insane, and walks back into his empty house playing his wooden clarinet.