In the world of Halloween Town, Jack Skellington is venturing into a forest with his ghost dog, Zero. He finds a series of trees with uniquely-shaped doors on them. He approaches a tree with a Christmas tree-shaped door and peers inside. Behind the door is a black void with snow blowing out of it. Suddenly, a gust picks up and blows him into the void.
Sora, Donald, and Goofy arrive in the world, but something isn't quite right. They find the town full of Christmas decorations; spooky, Halloween-esque Christmas decorations, but Christmas decorations nonetheless. Jack shows up in a makeshift sleigh pulled by skeletal reindeer and wishes them Merry Christmas. He tells them that he's going to be in charge of Christmas again, implying he's done it before. He says he needs the approval of "Sandy Claws" first, so he's heading to Christmas Town, but first he needs to meet Sally.
They head to Dr. Finkelstein's lab, where he's working on a strange experiment; what's more, the troublemakers Lock, Shock, and Barrel are helping him. Sally tells Jack that the thing she's making isn't quite ready yet, so he goes off to Christmas Town. She tells Sora that she's worried that something bad will happen if Jack goes through with his plan, so she asks him to stop him. Before they can go, some Heartless so up in the town square, so they deal with that problem first. Sora, meanwhile, is very eager to go with Jack because he wants to meet Santa. After the battle, Jack asks Sora and friends if they can be Santa's bodyguards to protect him from the Heartless, which Sora gladly accepts. Meanwhile Lock, Shock, and Barrel are trying to decide what kind of prank to pull next, when they are suddenly confronted by Maleficent, who offers to help show them what true mischief looks like.
The group of friends arrive in Christmas Town, but even that wintry wonderland isn't free of the menace of the Heartless. They fight their way through the town until they reach Santa's workshop, where they find the big man himself. They go to the factory, where the three pranksters and Maleficent are plotting. After Sora and friends show up, they are forced to flee before Maleficent can tell them the plan. Santa asks Jack to catch them because they've been very naughty. Back outside, they see footprints in the snow leading back to Halloween Town, so they return there.
At the Spiral Hill, the three pranksters are reminiscing about how evil Oogie Boogie was. Maleficent remembers Oogie and decides to resurrect him. He seems prepared to help her, but he suddenly gets very tired. Maleficent realizes that he needs to recover first, so she summons a Heartless called the Prison Keeper to keep Sora and Jack busy. When they reach the Spiral Hill, the three pranksters use the Heartless to fight them, but it is destroyed. The pranksters tell them that Oogie has returned before running off.
Santa decides to confront Jack himself, so he begins making his way to Halloween Town. In the forest, Sally approaches him. She says that she fears what will happen if Jack gets his way, so she urges him to return home and not listen to what Jack has to say. Unbeknownst to them, Maleficent and Oogie Boogie are spying on them. Maleficent explains her plan to him: Oogie will kidnap Santa and wreak havoc in Christmas Town to lure Sora and friends back there. While he does, Maleficent will turn Santa into a Heartless. Oogie takes Santa, but Sally manages to get away. She tells Jack what happened, so the group returns to Christmas Town.
Maleficent and Oogie prepare to fight their adversaries together, but Oogie's ego gets in the way. Before Maleficent can turn Santa into a Heartless, Oogie bumps into her. He rudely tells her to leave, so she grants him his wish, telling him that he'll regret it. When Sora and Jack reach the factory, Oogie prepares to fight, but he has somehow forgotten why Santa was in the factory in the first place. He tries to get rid of him, but Sally creates a distraction by detaching her leg, giving Santa enough time to escape. An enraged Oogie tries to use the hijacked factory to destroy them, but they defeat him. Oogie Boogie falls apart and becomes a swarm of bugs once again. This time, Donald makes sure to squash the last remaining bug so he can't come back.
With Santa saved, Sally presents the thing she was making earlier: a Santa costume for Jack. He offers to take over Christmas again, but Santa reminds him that he has his own place as the Pumpkin King. Just as Santa's purpose is to make children happy, Jack's purpose is to scare them. Jack realizes that he is right, so he decides to go back and take care of Halloween. Before he does, though, his Santa suit begins to glow. It serves as the gate to the next world, so Sora unlocks it. Santa reminds Sora that Riku told him that Santa wasn't real, but nevertheless he wishes Riku well. Sora asks Santa if he knows where Riku is, but unfortunately he doesn't know. He wishes Sora and friends good luck, and with that, they make their way to their next destination...
- Ability Required to Proceed: Defeating Oogie Boogie rewards the Magnet spell, which is required to unlock the "Part of Your World" chapter in Atlantica.
- The Anti-Grinch: What sets this episode into motion is Jack wanting to again take over for Santa out of fascination. Santa has to outright put Jack in his place by explaining that Halloween is his calling, and that how would he feel if someone tried to bench him for Halloween?
- Arc Hero: Jack Skellington is the Guest-Star Party Member, although he's a downplayed case, since he wants to fulfill Santa's duty this Christmas, which Sora and his friends oppose.
- Arc Villain: Maleficent, who tries to turn Santa into a Heartless because she hates Christmas.
- Came Back Wrong: Maleficent restores Oogie Boogie, only for him to develop anterograde amnesiafact . This frustrates her to no end, and when he (accidently) stops her from killing Santa, Maleficent leaves Oogie to his fate.
- Christmas Town: Half of the episode is set here. In the Final Mix version, Sora, Donald, and Goofy even gain forms matching the town's nature.
- Demoted to Dragon: Oogie Boogie ends up working for Maleficent this time around. It's short-lived, as Maleficent leaves in anger due to Oogie's memory issues (and being a Jerkass to her) and he falls to Sora's party shortly afterwards.
- Fisher Kingdom: Halloween Town is unique in that* there are two sets of forms for SDG.
- Sora retains his flamboyant Perky Goth outfit and Eyepatch of Power in Halloween Town, which is altered to match his age-up. In Christmas Town, he's still a goth, but now has a black Santa sweater and hat over his garb.
- Donald is a Mummy as in the first game. In Christmas Town, he's a Snowlem. Oddly enough, when Sora mentions seeing a real snowlem later on, Donald initially believes he's hallucinating until he meets Olaf himself.
- Goofy remains a construct in Halloween Town, while he gains a reindeer costume in Christmas Town.
- Nice Job Fixing It, Villain: Maleficent was beginning to turn Santa into a Heartless when Oogie bumps into her. When called out for being a "clumsy oaf", Oogie tells her to get lost. Offended by his condition and behavior, Maleficent abandons Oogie and Santa, eliminating her as a threat against Christmas.
- O.O.C. Is Serious Business: It's not like they haven't seen Sora be a loony fanboy before, but Donald and Goofy are quickly concerned over Sora's selfish desire to meet and protect Santa. It's only after his embarrassing secret is revealed (that he's been on the naughty list for seven years) does Sora return to his usual stoicism.
- Revenge: Oogie deeply seeks revenge on Sora, Donald, and Goofy for their roles in his downfall.
- Santa's Existence Clause: Sora and Kairi stopped believing in Santa when they were eight because Riku told them he didn't exist. Unfortunately, Santa knew this, and Sora has a nervous breakdown upon learning he's on the naughty list for this.
- Saving Christmas: While this episode is set around mid-November, Maleficent plans to turn Santa Claus into a Heartless and permanently ruin the holiday for the universe.
- Subbing for Santa: Jack wants to sub for Santa, believing the latter should have a year off.
- We Need a Distraction: Lock, Shock, and Barrel are tasked with using the Prison Keeper to keep Sora from protecting Santa when Oogie captures him. Also, Sally throws one of her legs at Oogie to distract him long enough for Santa to break free of his grasp.
- Would Hurt a Child: Both sides show no limits to attacking minors; 15-year old Sora having no problems fighting the approximately 11-year-olds Lock, Shock, and Barrel, while being targeted by Oogie Boogie himself for his role in the latter's first defeat.
