Sidney Milburn, known as the "Lemon Drop Kid," Bob Hope is a wily New York City swindler who makes a living by illegally touting horses at a Florida racetrack, steering bets for a cut of the winnings. He targets a beautiful woman and persuades her to place a $2,000 bet on a horse named Iron Bar, hoping to skim a share as the race unfolds. His plan hinges on luck and manipulation, but the twist comes when the horse finishes dead last and the woman turns out to be betting for her boyfriend, a notorious gangster. The enraged companion, Moose Moran, demands $10,000—the amount Moran would have won—by Christmas Eve, or the Kid won’t see the new year.
With the clock ticking, the Kid heads back to New York to scrape together the money. His first stop is again with his on-again, off-again girlfriend Marilyn Maxwell Brainey Baxter, whose patience with the scam wears thin once real commitment is on the table. When romance and steady plans collide, the Kid bolts rather than settle into a conventional life. He then pays a call on the local crime boss Lloyd Nolan Oxford Charlie, who is entangled in tax trouble and not inclined to sponsor the Kid’s latest scheme. Leaving Charlie’s turf, the Kid spots a street corner Santa Claus and a kettle—an idea that could turn him into a legitimate benefactor as he adopts a holiday guise to collect donations. Unfortunately, a passing policeman recognizes him, and the attempt to panhandle lands him in jail for ten days once he cannot pay the fine.
A stint behind bars becomes a turning point. Brainey bails him out, and the Kid realizes that real legitimacy might come from helping others rather than chasing quick cash. He hatches a plan to create a charity-backed venture and enlists Nellie Thursday Jane Darwell Regan, a kindly neighborhood woman who has long been shut out of a retirement home because of her jailed husband. Together with a cadre of small-time schemers and the ever-watchful Brainey, the Kid orchestrates a transformation of an abandoned casino—ironically once owned by Moose Moran—into the Nellie Thursday Home For Old Dolls. They secure a city license, and the Kid begins collecting funds in earnest, all while the others play their parts in Santa suits across Manhattan. The operation appears to be a genuine good deed, and the early returns are bountiful: a few thousand dollars in just a few days. For a moment, Brainey revels in the idea of leaving her dance job to care for the home full-time.
But the venture draws the attention of Charlie, who sees the Nellie Thursday Home as a potential gold mine. He and his crew decide to muscle in, claiming that the home moves with Nellie Thursday wherever she is. They kidnap the residents, including Nellie and Brainey, and haul them to Charlie’s mansion in Nyack. The Kid returns to find the home emptied and the money he stashed in a hollow statue gone. A telltale trail—giant footprints in the snow—points toward Charlie, and a phone conversation with Moran exposes the Kid’s plan to the gang. The circle tightens, and the Kid’s allies turn wary, though he still manages to slip away. Brainey, however, follows and voices her disgust.
On Christmas Eve, a renewed resolve takes hold. Nellie, somehow, has escaped, and the Kid resolves to recover both the residents and the money. He sneaks into Charlie’s mansion disguised as an elderly woman, searching for the missing funds and a way to outmaneuver the thug’s trap. A brief, tense confrontation with Charlie in his office ends with the Kid overpowering him and seizing the money, narrowly outrunning Charlie’s pursuing thugs. The escape paves the way for a broader plan: back at the Nellie Thursday Home, the Kid and his loyal friends stage a final, chaotic stand that coincides with a police raid.
As the raid unfolds, Moose Moran and Oxford Charlie are arrested, and the Kid’s leadership is vindicated. The undercurrent of danger gives way to a hopeful conclusion: the Kid pledges to devote his energy to turning the Nellie Thursday Home For Old Dolls into a permanent reality, and Nellie Thursday’s husband Henry Regan [Francis Pierlot] is joyfully reunited with his wife, signaling a Christmas miracle born from a blend of cunning, charity, and a second chance at community.
