A joyful party has already started under the Christmas tree. The children merrily dance around the Christmas tree.

Disguised Drosselmayer, Marie's godfather, shows up wearing a mask. The children cannot recognize him. Drosselmayer shows the children a magic. He makes his cane stand up straight. Now, it is time for the wind-up toys to dance. Harlequin shows off the high jumps. Colombina presents smooth spinning moves, and He-Devil displays violent and startling dance together with She-Devil. The children love them all. Off with the mask, it is Drosselmayer, the godfather of Marie and Fritz. Marie and Fritz are each given a Christmas present from him. Marie got the somewhat clumsy-looking Nutcracker.

Fritz, the naughty boy, is jealous and breaks the toy accidentally. Drosselmayer soothes the sad girl.

As the evening wears on, the adults enjoy their final dance toasting each other and take their children to bed.

Late at night, Marie comes down to the living room, worried about her Nutcracker. She embraces the sick Nutcracker and falls asleep, dreaming a wonderful dream where Drosselmayer shows up in her living room as a real magician.

At the wave of his hand, everything around him shifts, suddenly the Christmas tree begins to grow enormously, and with it the toys from diverse countries are brought to life, even the broken Nutcracker. Just then, the mice appear with their Mouse King. The toys are terrified. The Nutcracker marshals the toys and leads them into battle with the mouse army.

The Nutcracker falls in danger in a duel against the Mouse King. Marie, as Drosselmayer taught her, throws a lit candle at the Mouse King, and the mice go panic and disperse in all directions.

As Marie and the toys hurry to the Nutcracker's aid, suddenly all the lights go out, and when the brightness is back, the old Nutcracker is now a wonderful Prince.

The fine Prince Nutcracker shows Marie around Christmas Land as an expression of his gratitude. On the way to Christmas Land, they dance with the magical snowflakes, travel under the sea in their boat and set off on high into the sky. The toys follow in their trail.

Soaring up into the sky, Marie and the Nutcracker come close to a large star. Finally they have arrived at the top of the Christmas tree.

But then again, the mice catch them up and Prince Nutcracker engages in battle. The Mouse King is easily defeated. Marie and Prince Nutcracker are overjoyed with the victory and the toys start to dance in celebration. The Spanish dance, Indian dance, Chinese dance and the French dance. And then comes the enchanting Flower Waltz.

In the end, Marie and Prince Nutcracker hold a happy and fantastic wedding ceremony dancing their pas de deux.

It was all just a fanciful dream. A new day dawns and Marie wakes up on Christmas morning smiling at the thought of last night’s enchanting dream. Merry Christmas to you all!