Scott Calvin is a 38-year-old divorced father and advertising executive for a toy company in the fictional city Lakeside, Michigan with a young son, Charlie . On Christmas Eve, Charlie comes over to spend the night with Scott before going back to his mother and stepfather's for Christmas Day. Scott attempts to assure Charlie of Santa Claus' existence, while in full disbelief himself. That night, they are awakened by a clatter on the roof. Going outside to investigate, they can see someone on there. Scott yells at the trespasser, "Hey, you!", which causes him to lose his balance and fall off. He appears to be Santa Claus.
After he lands he magically disappears, but his suit remains. They find a business card in a pocket stating that if something should happen to him, someone should put on the suit, and the reindeer will know what to do. They find his sleigh and eight reindeer perched on the roof. While trying to figure out how to explain all of this to people, Scott bumps his head on a ladder leading up to the roof. Scott puts on the suit to please Charlie, and begins delivering toys from house to house.
Their final stop is the North Pole where the head elf, Bernard , shows him a tiny inscription on the card which says that upon the disappearance of the previous occupant, whoever wears the suit immediately assumes the identity of Santa Claus and all the responsibilities that go with it. This is the "Santa Clause," as stated by Bernard: "You put on the suit and you're the big guy!" He also gives Charlie a snow globe as a gift. He then tells Scott that he only has eleven months, until Thanksgiving, to get his affairs in order before becoming Santa Claus full time, which he tries to refuse. He and Charlie spend the night at the factory. The next morning they awaken back in Scott's house, where the only indication of their previous night's adventure is his new silk pajamas with "SC" monogrammed on them. He dismisses it all as a dream.
Soon, however, Scott starts gaining weight and his boss, Mr. Whittle , likens him to the Pillsbury Doughboy and he interjects a presentation on the company's new toy by complaining about Santa not being represented with his sleigh and they should simplify their toy designs. He develops a ravenous taste for Christmas treats, like cookies and hot cocoa. Scott's facial hair grows practically overnight, and shaving it off has no effect as it regrows instantly. His hair turns gray then white, despite all attempts to dye it. He somehow knows who has been "naughty" and "nice". Scott also starts wearing clothes with red and green, and his heart even beats Jingle Bells. Children approach him with gift requests. His rapid transformation worries his ex-wife Laura and her new husband, psychiatrist Dr. Neil Miller , who tries to terminate his visitation rights to Charlie. They question his mental stability, and believe that his changes are attempts at getting his son to like him.
Eventually, Scott's visitation rights to Charlie are suspended. Disheartened, he begins to lose some of his certainty about his job as Santa. While visiting Charlie on Thanksgiving, Charlie's insistence that Scott is Santa reawakens his magic and he, with Bernard's help, whisks him away to the North Pole. Laura and Neil, who think he has kidnapped him against his will, call the police, who start a massive investigation.
Meanwhile, at the North Pole, Charlie helps Scott and the head elves perfect a new sleigh and communication devices. He calls his mother, but this only reinforces their belief that he is being held against his will. Nevertheless, Scott, as Santa Claus, goes on with his Christmas Eve trip, but is arrested while delivering presents to the Miller house, and is accused of kidnapping Charlie. A team of rescue elves called the ELFS free him from jail by tying up the front desk guard and using tinsel to break through the bars . The ELFS then fly him and Charlie home to Laura and Neil, to whom Scott/Santa gives the presents they always wanted since childhood but never got .
Laura, finally realizing that Scott really is the new Santa, tosses the custody papers into the fireplace and welcomes him to visit Charlie any time that he desires. Neil, both amazed and joyful, realizes that one does not have to see to believe. Bernard tells Charlie that the snow globe is magical. Anytime he wants his father to visit, all he has to do is shake it. After ten minutes, he does so and Scott comes back, saying he was on his way to Cleveland, and takes Charlie with him to deliver the rest of the presents.
