It’s Tango’s first Christmas and Elmo is having a big party with family and friends. The Count brings Christmas presents for everyone and Tango receives a nutcracker doggy toy. After the party, Elmo’s dad reads him a bedtime story, The Nutcracker, and Elmo and Tango fall asleep. Elmo wakes up to Tango talking, realizing that he’s dreaming! As Elmo and Tango excitedly sing and dance together, a mouse comes into Elmo’s room and takes Tango’s nutcracker toy. Elmo and Tango notice the mouse leaving with her toy and follow him. Along the way, they travel through the Land of Flowers, Land of Sweets, and lastly, the Land of Toys where Tango gets her toy back. The mouse apologizes for taking Tango’s toy explaining that he just wanted a friend to play with. Elmo and Tango become friends with the mouse, and they all celebrate Christmas together. Elmo wakes up from his dream, and he realizes that being together with friends makes the best Christmas ever.