As the Thanksgiving parade draws to a close, Dorey Walker (Maureen O'Hara), the special events director at Cole's Department Store, finds herself in a difficult situation after firing Tony Falacchi (Edmund Gwenn), the store's beleaguered Santa Claus, due to his drunken state. Seeking a desperate solution, she encounters an elderly gentleman who was scolding Falacchi, and in a moment of hope, she convinces him to take on the Santa role. This unexpected twist introduces her to Kris Kringle (Kris), a man whose genuine passion and goodwill surprisingly make him a perfect fit for the part.
Once he steps into the role, Kris’s infectious charm and connection with children of all ages make a remarkable impact, attracting massive crowds and reviving a sense of magic and joy for the holiday season. His unconventional yet effective technique of directing shoppers to other stores that sell toys at lower prices unexpectedly boosts Cole's sales, much to the dismay of rival Shopper's Express, whose leaders, including the crafty Jack Duff (Jack Albertson), are left reeling. This newfound success also casts a shadow of worry among Cole's executives, particularly as they navigate the fallout from a threatening takeover attempt by Victor Landberg.
Amidst this chaos, Dorey faces her own uncertainties, grappling with her skepticism about Santa and the strain in her relationship with her six-year-old daughter Susan. As she watches Susan begin to bond with the enchanting Kris, Dorey’s fears about her efforts to dispel the myth of Santa begin to unravel.
As the tension escalates, Landberg and Duff hatch a scheme to bring Kris down, roping in Falacchi to stage a series of events leading to Kris's arrest. With the stakes mounting, Bryan Bedford (John Payne), the attorney living next door to Dorey, steps in to provide legal assistance and arrange a critical court hearing for Kris. In a bold turn of events, Dorey takes on the mantle of an advocate for Kris, rallying community support as they prepare for a looming trial against prosecutor Ed Collins.
As the dramatic evening unfolds, Judge Henry Harper finds himself in a moral quandary, having to choose between labeling Kris as insane or conceding to the reality of Santa Claus’s existence. The next day, as the judge is about to render his decision, Susan unexpectedly intercedes with a touching Christmas card that features a $1 bill and the phrase “In God We Trust” highlighted. This touching moment shifts Judge Harper’s perspective, leading him to the conclusion that if the U.S. Treasury can profess faith without tangible proof, then New Yorkers should likewise be permitted to have faith in Santa Claus. With renewed conviction, the judge clears Kris, recognizing him as the true Santa Claus.
Following this significant moment, Bryan and Dorey find themselves guided by Kris to confront their genuine feelings for one another, culminating in a heartfelt exchange of vows during an intimate ceremony after the Christmas Eve Midnight Mass.
On Christmas morning, Susan is awakened to the joyful news of their marriage, and her heart swells as she discovers that part of her Christmas wish has been fulfilled. A journey to the catalogue house awaits her, where they find that Kris—having now departed—has arranged for them to acquire the property thanks to Dorey's generous Christmas bonus.
As Susan's second wish comes true, Dorey inquires about her last desire. With a radiant smile, Susan reveals that her wish was for a baby brother. The weight of this revelation leaves Bryan and Dorey momentarily stunned, their gazes shifting to Dorey’s stomach, sealing the moment with a romantic kiss that signifies the binding of their family and future together.
