On their way to join their friends' ice skating on a frozen pond, Charlie Brown confesses to Linus Van Pelt that, despite all the things he likes about the Christmas season, he is still depressed. After Linus' reproach, and a put-down from Violet, he visits Lucy Van Pelt's psychiatric booth and tells her his problem. She suggests he direct the group's annual Christmas play to get involved, and he accepts.
[Charlie Brown] becomes even more discouraged by his observations of Christmas' commercialization as he heads for the rehearsal: Lucy laments over not receiving real estate for Christmas; Snoopy decorates his doghouse for a neighborhood lights and display contest; and Charlie Brown's younger sister Sally Brown asks him to write a greedy letter to Santa Claus. At the rehearsal, Charlie Brown finds a play fit for the 1960s with dancing, lively music, an uncooperative cast, and a "Christmas Queen" (Lucy). Unable to control the cast, Charlie Brown decides the play needs a more "proper mood", and recommends a Christmas tree. Frieda suggests a big, pink aluminum Christmas tree, then sends him and Linus to get one.
At the tree lot, Charlie Brown picks the only real tree there, a small sapling. Linus questions his choice, but Charlie Brown believes that once decorated, it will be perfect. Upon their return, Lucy, Violet, Patty, and Frieda scorn him and the tree. Crestfallen, Charlie Brown asks if anyone knows what Christmas is all about. Linus says he does, walks to center stage, asks for a spotlight, drops his security blanket, recites the King James Version of the annunciation to the shepherds, picks up his blanket, returns, and says, "That's what Christmas is all about, Charlie Brown."
> That's what Christmas is all about, Charlie Brown.
Realizing that he does not have to let commercialism ruin his Christmas, Charlie Brown takes the tree home to decorate it and show the others that it will work in the play. The others realize they are too hard on Charlie Brown and quietly follow him after listening to Linus' speech. He stops at Snoopy's doghouse, which has won the lights and display contest, and hangs a large red ornament on his tree. The ornament's weight causes the tiny tree to bend to the ground. Believing that he killed the tree, Charlie Brown becomes so dejected, that he walks away.
The others arrive at Snoopy's doghouse and as they all start to see its potential, Linus gently uprights the drooping tree and wraps his blanket around its base to offer some support. After the others hand the tree a makeover using more decorations from the doghouse, even Lucy concedes to Charlie Brown's choice. The kids then start humming Hark! The Herald Angels Sing. Hearing them, Charlie Brown returns to see that the sapling is a fully decorated Christmas tree. All the kids shout, "Merry Christmas, Charlie Brown!", and then sing Hark with Charlie Brown and Snoopy (original version only) joining in as snow begins to fall.
