Shrek is quietly living in the swamp with his family when the Christmas season arrives. Under Donkey's urging, Shrek reluctantly promises Princess Fiona a special Christmas surprise. Shrek goes to the local bookstore in Far, Far Away to try to find a present for Fiona, but since he does not know what Christmas is all about, the shopkeeper gives Shrek a copy of Christmas For Village Idiots, a step by step guide to celebrating the holiday. Shrek proceeds to follow the book's advice by decorating the house and getting a tree so he can spend a quiet Christmas Eve with his family, but Donkey brings the entire "family" to the swamp, spoiling Shrek's plans.
As Shrek tries to recite "A Visit from St. Nicholas", Gingy, Donkey, and Puss in Boots interrupt and each tell their own Christmas story. Donkey tells of a Christmas parade passing by the swamp and licking an enormous waffle Santa, and absentmindedly starts licking Shrek's foot. Puss' version of the Santa Claus story ends with playing with the tassel on Santa's hat, while in reality he is playing with a bauble.
Gingy tells a horrifying story about how his girlfriend Suzy was eaten by Santa Claus. Donkey calls it ridiculous, and finds Shrek's Christmas for Village Idiots book. A fight breaks out over the book and Shrek's supper is destroyed. After lighting his butt on fire, Shrek finally loses his temper and kicks his friends out of his house.
With their Christmas spirit ruined, Fiona is upset at Shrek's behavior and leaves with the ogre triplets. She catches up to their friends and explains to Donkey what Shrek had wanted for Christmas.
Shrek, remorseful at what he's done, catches up with the group and apologizes for his behavior. He then tells everyone this is also his first Christmas, since ogres don't celebrate anything. They return to the swamp and Shrek tells his own version of "The Night Before Christmas", featuring himself as Ogre Claus. Soon they hear bells and go outside to see Santa and his reindeer, although Gingy is still afraid of Santa Claus and runs back inside in fear. The special ends with Santa using his magic to put ogre ears on the moon.
