In the charming backdrop of Vienna during the 1920s Christmas season, we meet young Mary, who lives with her parents, Joseph and Louise, as well as her younger brother Max. Excitedly anticipating a family gathering, her hopes are dashed when her parents decide to attend a party that evening. Just as the evening seems bleak, Uncle Albert arrives with thoughtful gifts for both Mary and Max; a beautiful dollhouse for Mary and a delightful nutcracker doll named NC for Max. Mary's enchantment with NC grows when he unexpectedly transforms into a human before her eyes.
Together, they descend into a fantastical realm, finding themselves in a vast room where the furniture is miniaturized, and within the dollhouse, Mary encounters an array of whimsical characters: Gielgud, a sophisticated chimpanzee; Tinker, a meticulous opera singer; and Sticks, a talented drummer boy. Their adventure takes a mystical turn as Mary climbs a towering Christmas tree and meets the Snow Fairy, who strikingly resembles her mother. The Snow Fairy unveils that NC is actually a prince, cursed by the Rat King and his malevolent mother, the Rat Queen, who turned him into a nutcracker.
Mary, filled with belief in the Snow Fairy's revelations, taps into her imagination and inadvertently lifts the curse, allowing NC a fleeting chance to dance as his true self before they embark on a quest to reclaim his kingdom. They soon learn that the Rat King has plunged the prince's realm into despair, forcing its inhabitants to toil in factories where their children's toys face destruction, casting a grim pall over the city.
Determined to fight back, Mary suggests they dismantle the factories to instill fear in the Rat King, oblivious to two spies reporting their every move back to him. The Rat Queen quickly reverts NC to his nutcracker form and releases a hoard of mechanical Rottweilers known as Rat Dogs to topple the Christmas tree. Awakening in her own bed, Mary rushes downstairs, desperate to explain her adventures, but her parents dismiss her vivid accounts as mere figments of her imagination.
However, the journey doesn't end there. Under the ethereal glow of the moon, NC is reanimated in Mary's world, revealing his ambition to assemble a courageous army to take down the Rat King. Soon, Mary’s brother, Max, awakens and joins their noble endeavor, but troubles arise when NC is abducted right before their eyes by the cunning Rat King and his followers, who have been secretly snatching toys and pulling them back to the city.
Mary, determined not to give up, finds the clever Gielgud, who has evaded capture, and together they uncover a hidden portal that transports them directly to the city's heart. Disguised as rats, they embark on a treacherous mission to rescue NC, Tinker, Sticks, and other toys imprisoned by the Rat King's minions. Their quest leads them to a city center where Max is also imprisoned, facing a terrible fate alongside other toys about to be discarded.
As the grim scene unfolds, Max bravely asks the Rat King for release but finds himself trapped within his ominous castle. Unfazed, Mary and Gielgud infiltrate a factory where they find their friends, including the seemingly lifeless NC. In a moment of bold courage, Mary confesses her love for NC, triggering the breaking of his curse. Revived, NC transforms into a living boy, and his return empowers the factory workers, spurring them to stand against the rats in a courageous uprising for freedom.
Just as Mary and NC make strides to shut down the factory, the Rat King and Queen capture them, whisking the duo away in a helicopter. An intense chase ensues led by Gielgud and NC, culminating in a fierce confrontation with the Rat King, as Max skillfully lands the helicopter ineffectively in a heap of toys.
In the aftermath, the Rat King and Queen retreat to the sewers, reverting to their true rat forms, while NC is crowned king, bringing joy and liberty back to his subjects. The Snow Fairy bids a heartfelt farewell to Mary as she prepares to return to her world.
Settling back into her reality, Mary receives an apology from her parents for their earlier skepticism, promising more cherished moments together. Mysteriously, Uncle Albert introduces Mary to his new neighbor—a boy who mirrors the Prince, asking to be called NC. As fate intertwines their paths, Mary and this new NC form a special bond, embarking on joyous adventures and laughter as they glide across the ice together.
