Cartman has to score one big "nice" on Santa's list to be eligible for Christmas presents this year. He recruits Santa, Mr. Hankey, and Jesus in a desperate attempt to bring Christmas to the downtrodden citizens of Iraq.
Eric Cartman's naughty or nice accountant (Kyle Broflovski's cousin Kyle Schwartz) performs a tally, and it's obvious that Cartman has been too naughty to earn his coveted Christmas gift, a Haibo robot dog, in fact in Kyle's words he's been so naughty that even if he cured cancer and AIDS in a week he'd still owe Santa two presents. He'll have to perform the nicest act ever to reverse the prior year of evil, and sets out to spread Christmas cheer to the people of Iraq. Meanwhile, at a tree lighting ceremony, Jimmy Valmer begins to sing his favorite Christmas song, "The Twelve Days of Christmas" which, unknown to the gathered crowd (which includes most of the town) will take him all of the episode to complete due to his stutter.
With the use of Mr. Hankey's Poo-Choo train, Cartman and the other boys travel to the North Pole to convince Santa Claus into make a special trip. With the assistance of the Underpants Gnomes, Santa prepares his sleigh and travels to Iraq, only to be promptly shot down by a Rocket Propelled Grenade. The reindeer are dead, Santa is injured, and he is soon caught and tortured by his Iraqi captors who torture him by covering him in water and shocking his testicles. The boys realize that Cartman's little plot may have ended Christmas for everyone, including Santa, and set out to make things right.
Taking the backup sled and new reindeer (named Steven, Fluffy, Horace, Chantel, Skippy, Rainbow, Patches and Montel) from the stable, they seek out the one person who can help: Jesus Christ, who is currently officiating midnight mass in his own name. When he hears of the tragedy that has befallen his old friend Santa, Jesus promptly arms himself with an array of automatic weapons and sets out with the boys to Iraq, brutally gunning down everyone who impedes him. Jesus and the boys break into the interrogation room where Santa (who is now being forced to drink oil) is being held and kill the Iraqi soldiers within (all except for the interrogator, who is later executed by Santa. Jesus is surprised at Santa killing someone, but Santa responds "I couldn't do it! I couldn't let him live! He shocked Santa's Balls!").
The boys carefully carry the injured Santa back to the sleigh, but a stray shot from a soldier kills Jesus moments before they can escape. Stan and Kyle revive their old catch phrase; Stan says "Oh my God, the Iraqis killed Jesus," and Kyle responds with "You bastards!" Outraged, Santa kills the soldier, acquires his fallen friend's weapons and then proceeds to blast his way out, setting off bombs which transform Iraq into a Christmas-decorated country, complete with wreaths, Christmas trees, lights and tinsel.
To the town's delight, Jimmy then finishes his song that he started at the beginning of the episode. He switches on the lights on the Christmas tree, but unfortunately they don't work, and the town is disappointed, but Santa makes it all right again.
Moments before Christmas Day begins, a rapidly recuperating Santa returns the boys home to South Park and expresses his hope that people will always remember Jesus on this day. He also gives all three boys Haibo dogs, much to Cartman's disgust, as he wanted to be the only owner and have his friends envy him. Kenny then arrives, and upon Kyle asking him where he's been, he simply says he'd been hanging out. As the four walk away, Stan comments on how things seem like they are back to normal now and Kenny agrees.