This episode, which like many Christmas shows has an anapestic rhyming narration and storybook style, begins in the forest, where "the boy in a red poof-ball hat" — a.k.a. Stan Marsh — discovers a group of talking animals building a Christmas tree. They convince a confused Stan to help make a star for their tree before he goes home. That night, they wake him in his room and explain that one of the animals, a porcupine named Porcupiny, is pregnant with the creatures' savior. Stan agrees to help them build a manger for the baby, despite his protests that he has school the next day. They then enlist his help against another problem: every year, they explain, one of the animals conceives their Savior, but every time an evil mountain lion kills it before she gives birth to the baby. They insist that Stan is the only one capable of helping them. Exasperated, Stan manages to kill the beast, but is dismayed to find that the lion was the mother of three now-orphaned cubs. Returning to the critters, Stan is further horrified to discover that the woodland critters are, in fact, Satanists, and that their Savior is actually the Anti-Christ, not an animalistic Son of God. The animals celebrate by sacrificing Rabbitty the Rabbit and devouring his entrails, which is immediately followed by a blood orgy.
Stan tries to stop the animals himself, but they rebuff him with their Satanic powers, cheerfully conjuring up fire and demonic beasts. After he learns that only a mountain lion can kill the Anti-Christ, Stan returns to the mountains to enlist the orphaned cubs, and takes them to an abortion doctor to teach them how to perform abortions (against his will — the narrator forces him to). Meanwhile, the animals are searching for a human host for the Anti-Christ to possess when born — the person in question must be a non-baptized non-Christian. They discover Kyle Broflovski, who is Jewish, and kidnap him to serve their purpose.
Stan arrives in time to discover that the Anti-Christ — a strange, vicious little creature — has already been born, and that his best friend Kyle is tied to a Satanic altar to receive the evil creature. Santa Claus suddenly arrives and, when he learns what is happening, pulls out a SPAS-12 combat shotgun and slaughters all the creatures. He is about to kill the Anti-Christ, but Kyle — now free from the altar — declares that he wants the Anti-Christ to possess him, so that he can make the world better for the Jews. He allows the demon to possess him, and is about to unleash a devastating blow on the world when...
...the story suddenly cuts away to Mr. Garrison's fourth-grade class, where it is revealed that everything that had happened so far in the episode was merely a Christmas-themed story Eric Cartman was reading to the class. Kyle angrily objects, claiming that it is nothing more than Cartman's attempt to once again mock him for being Jewish at Christmas time. Mr. Garrison, fearing complaints from Kyle's mother, forces Cartman to stop. The other students, however, plead with Kyle to let Cartman continue because they want to hear the ending; Kyle objects that the ending is obvious, that Kyle, in the story, will be killed by Santa Claus so that Christmas is saved. Cartman says that is not the ending at all, and as the other boys persist, Kyle angrily and begrudgingly allows Cartman to continue.
Back in the story, Kyle suddenly declares that he can now feel that the Anti-Christ is pure cold, dark and evil and wants it out, while Stan responds, "What did you expect dude? It's the son of the Devil!" Santa, however, says that they have no choice but to kill Kyle, before the Anti-Christ can consume his soul and unleash his reign of terror. Stan, however, has the mountain lion cubs perform an abortion on Kyle's anus, removing the Anti-Christ, which Santa unceremoniously smashes with a sledgehammer. Santa gives Stan a special Christmas wish, and Stan uses it to have Santa resurrect the mountain lion cubs' mother. Everyone then goes home to a happy Christmas.
And we see the old-fashioned classic title card reading "The End". The narrator then concludes the story by stating that: "they all lived happily ever after... except for Kyle, who died of AIDS two weeks later" (to which Kyle angrily replies "Goddammit, Cartman!"). The Christmas song in the beginning plays over the ending credits.