Herr Stahlbaum and his wife are giving a Christmas Party. Clara and Fritz, their children, greet the guests. The parents give toys to all the children. Suddenly, the mysterious Dr. Drosselmeyer arrives and entertains the children with his magical tricks and wind-up dolls.,
Dr. Drosselmeyer brings a special gift for Clara - a wooden nutcracker. In a jealous fit, Fritz breaks it. Dr. Drosselmeyer quickly repairs it. The party ends, the guests leave, and the Stahlbaums retire for the night. Clara awakens as a mouse runs through her room. The clock strikes midnight. Suddenly, the room fills with giant mice who attack Clara. Life-size toy soldiers, led by her valiant Nutcracker, come to her rescue. The King Rat attacks the Nutcracker, but Clara hits him with her shoe and the Nutcracker wins the battle. After the battle, the Nutcracker is transformed into a handsome prince.
The Nutcracker Prince turns the Stahlbaum's house into the Land of Snow. The Snow Queen and the Nutcracker Prince dance with the Snowflakes. Clara and the Nutcracker Prince depart for the Kingdom of Sweets in an enchanted sleigh.
Clara and the Nutcracker Prince continue their journey amnd arrive in the Kingdom of Sweets. They are greeted by the Sugar Plum Fairy. In Clara's honor, the Sugar Plum Fairy arranges for the inhabitants of her kingdom to entertain them while they eat: chocolate, a Spanish Dance; coffee, an Arabian Dance; and tea, a Chinese Dance. Clara is also entertained by the dance of the Mirlitons, a dance with Madame Bonbonaire and her clowns, a Russian dance, and the Waltz of the Flowers. Then, the Sugar Plum Fairy and the Nutcracker Prince dance a grand pas de deux. As the celebration draws to a close, Clara drifts off to sleep. Clara wakes up the next morning with her Nutcracker still in her arms.