On Christmas Eve, 1944, during the turmoil of World War II in Europe, two U.S. Army soldiers put on a memorable show for their fellow troops. The first is the Broadway performer, Captain Bob Wallace (Bing Crosby), and the second, the aspiring entertainer, Private Phil Davis (Danny Kaye). As Bob delights the soldiers with his rendition of "White Christmas," an air of melancholy permeates the atmosphere due to the news that their cherished commanding officer, Major General Thomas F. Waverly (Dean Jagger), is being relieved of his command. When he arrives to bid farewell, the soldiers rally around him for an emotional send-off, singing "The Old Man."
After the war, the duo achieves substantial success over the next decade as popular performers in nightclubs, on radio, and eventually on Broadway, turning into successful producers in Florida. They launch their latest musical, Playing Around, but receive an unexpected letter from their former mess sergeant, the "Freckle-Faced Haynes, the dog-faced boy," inviting them to see the act of his two sisters.
During the club audition for the sisters, Bob starts to develop feelings for Betty Haynes (Rosemary Clooney), while Phil takes a shine to her sister, Judy (Vera-Ellen). When Betty and Judy join them at their table, Phil encourages Judy out to dance, allowing Bob and Betty to bond. Their chemistry is palpable during the number "The Best Things Happen While You're Dancing."
Judy informs Phil that she and Betty will be performing at the Columbia Inn in Pine Tree, Vermont, for the holidays. Phil generously offers them his and Bob's train accommodations. Upon their arrival in Vermont, they discover a disappointing lack of snow and warmth in the air, jeopardizing business at the inn, which is managed by their former commanding officer, General Waverly. Having invested his life savings into the lodge, he's now facing difficult times as guests stay absent due to the weather.
Determined to assist the General, Bob and Phil bring the entire cast of Playing Around, along with Betty and Judy, to the inn in hopes of reviving interest. Meanwhile, the relationship between Bob and Betty flourishes ("Count Your Blessings"), as they spend time together and deepen their connection. Bob learns of the General's failed attempt to rejoin the army and resolves to show him that he's valued even in civilian life.
Bob reaches out to Ed Harrison (Johnny Grant), a former army mate now hosting a popular TV variety show, and proposes to invite the General's old soldiers to the inn for a surprise visit on Christmas Eve. Unknown to Bob, the curious housekeeper Emma Allen (Mary Wickes) overhears his conversation and, misconstruing the plan, conveys her belief that it will portray the General in an unflattering light, leading to misunderstandings with Betty. Conflicted and unwilling to believe that Bob would exploit their situation, Betty's demeanor shifts dramatically towards him.
Complications arise when Judy believes that Betty will never fully embrace a relationship while she remains unattached, leading her to pressure Phil into a feigned engagement. However, the scheme backfires when Betty departs for New York after receiving a job offer. Both Phil and Judy confess the truth to Bob, who remains oblivious to the misunderstandings driving a wedge between him and Betty. Desperate to explain, Bob arrives in New York to clarify the situation during one of Betty's performances.
As this unfolds, Phil fabricates an injury to distract General Waverly from the broadcast during which Bob invites the veterans of the 151st Division back to Pine Tree on Christmas Eve ("What Can You Do with a General"). When Betty, waiting backstage, witnesses the heartfelt message, she realizes her misjudgment and rushes back to the inn for the event. Emma schemes for General Waverly to don his old uniform, and when he enters, a rousing welcome from his former division erupts as they sing "The Old Man."
Finally, as the performance reaches its climax, snow begins to fall, setting the scene for love to bloom. Bob and Betty profess their feelings, mirroring the declarations of affection between Phil and Judy. The background transforms to showcase the snowfall as everyone toasts, "May your days be merry and bright; and may all your Christmases be white," culminating with Bob's final performance of "White Christmas."
