Oscar the Grouch raises doubts about whether Santa Claus can deliver presents on Christmas Eve if he can't fit through the narrow chimneys on Sesame Street, so Big Bird decides to stay up all night to solve the mystery with the help of his friends, Patty, Kermit, and Grover. He freezes his giblets while waiting on the roof of 123 Sesame Street and is rescued by Gordon and Susan. Before his rescue, during the search, Maria confronted Oscar for upsetting Big Bird. It was revealed that Oscar was only teasing him.
Meanwhile, Cookie Monster tries to communicate with Santa to ask for cookies for Christmas, but on all three attempts he gets so carried away with thinking about what sort of cookies Santa will bring him, that he winds up eating a pencil, typewriter, and telephone. While all this is going on, Ernie and Bert re-enact O. Henry's classic story "The Gift of the Magi" and, with the help of Mr. Hooper, learn a valuable lesson about generosity.
The program features a variety of seasonal tunes, including "True Blue Miracle," "Keep Christmas With You (All Through the Year)," "I Hate Christmas," and "Have Yourself a Merry Little Christmas." The special opens with an ice-skating sequence, combining the Sesame characters from Ice Follies with the Sesame Street humans to create the illusion that the entire cast of the show is enjoying an ice-skating trip. One of the highlights of this section is Big Bird skating with a little girl to José Feliciano's recording of "Feliz Navidad".
- Muppet Performers: Jim Henson, Frank Oz, Caroll Spinney, Jerry Nelson, Richard Hunt
- Cast: Linda Bove, Northern Calloway, Debbie Chen, Will Lee, Loretta Long, Sonia Manzano, Bob McGrath, Roscoe Orman, Alaina Reed
- Skating Muppets: skaters from the Ice Follies shows
- Producer: Dulcy Singer
- Directed by Jon Stone
- Written by Jon Stone and Joseph A. Bailey
- "True Blue Miracle" Composed by Carol Hall
- "Keep Christmas With You (All Through the Year)" and "I Hate Christmas" Composed by Sam Pottle and David Axlerod
- Music by Dick Lieb
- Music Coordinator: Danny Epstein
- Music Assistant: Dave Conner
- Associate Director: Ozzie Alfonso
- Production Supervisor: Robert Braithwaite
- Muppet Designers: Don Sahlin, Kermit Love, and Caroly Wilcox
- Art Director: Alan J. Compton
- Production Stage Manager: Chet O'Brien
- Stage Manager: Emily Squires
- Set Decorator: Nat Mongioi
- Lighting Directors: David M. Clark, Tony DiGirolamo
- Graphic Artist: Gerri Brioso
- Costume Designer: Bill Kellard
- Wardrobe: Grisha Mynova
- Production Assistants: Mercedes Polanco, Sharen Gay, Cathi Rosenberg-Turow
- Technical Advisor: Walt Rauffer
- Technical Director: Ralph Mensch
- Sound Effects: Dick Maitland, Roy Carch
- Audio: Mike Shoskes, Jay Judell
- Executive Producer: Jon Stone
- In various re-airings on PBS in the late-1980s, the closing scene with Susan and Gordon finding that Cookie Monster ate most of their Christmas tree was cut.
- On the DVD edition, the original Children's Television Workshop logo with Christmas music was cut.