NOTE: This spoiler was submitted by Kat
The film begins with a letter being delivered. We follow the letter as it makes its way through the post office system until it finally reaches the Drill Sergeant of the Royal Postal Academy. It’s a summons for one of the students, Jesper Johansson (Jason Schwartzman). Jesper’s father is the head of the academy and has enrolled Jesper in the hopes of teaching him about responsibility. Jesper, however, is a selfish brat and prefers to spend his time lounging in his luxurious tent.
Jesper’s overall performance is deemed abysmal by the drill sergeant; he’s completely careless with delivering mail. His father deduces that Jesper is doing this intentionally because he wants a different “punishment.” So he announces that Jesper is officially a postman and will be stationed in a small town named Smeerensberg. He also gives him an ultimatum: deliver 6,000 letters in a year, or he will be cut off from the family.
Smeerensberg is depressingly gray and cold. When Jesper arrives, the sarcastic ferryman Mogens (Norm MacDonald) tells him to ring the bell in the town square so he can receive a welcome reception. When he does so, a huge brawl breaks out between the townspeople. Turns out that the bell is known as “The Battle Bell.” The town is divided into two clans; The Krums and the Ellingboes, who have been fighting with each other for many years. Jesper manages to hide in a nearby schoolhouse. He meets the school teacher Miss Alva (Rashida Jones). Parents refuse to send their children to school (They don’t want their kids interacting with the opposite clan), so she’s been forced to sell fish. She’s been saving up her earnings so she can finally leave Smeernsberg. The ferryman finds Jesper and leads him to his new home: the dilapidated post office, full of snow and chickens. A boy sledding nearby throws a snowball at Jesper and calls him a loser.
The next morning, Jesper goes out to collect letters but finds none. He tries to ask the townspeople for their mail, but they’re too busy fighting and pranking each other. At one house, a young boy’s drawing lands at Jesper’s feet. He offers to “mail” it back, but the boy’s father chases him off. Two weeks later, Jesper has had no luck. However, there’s still one house he hasn’t tried yet: the woodsman, Mr. Klaus (J.K. Simmons), who lives far out of town. The home is empty, so Jesper lets himself in. In the basement, he finds hundreds of hand made toys. Klaus returns, and Jesper runs off, dropping his satchel. The boy’s drawing from earlier falls out, and Klaus picks it up, curious.
Jesper attempts to leave Smeerensberg but is stopped by Klaus. He wants to know where the boy lives. Jesper takes him the boy’s home, but the package Klaus wants him to leave is too big for the mailbox, and the yard is full of traps. He ends up being launched up and down into the chimney (courtesy of Klaus). Jesper leaves the present and runs off, but Klaus stays behind to watch the boy unwrap it and play with the toy. The next morning, Jesper is surprised to see several children outside his house. The boy told everyone about Klaus’ visit, and now they all want to mail letters to him, asking for toys. Jesper immediately starts handing out paper and pencils to the children and encourages them to make their letters sound sad. He makes a chart on the wall to keep track of how many letters he delivers. Jesper returns to Klaus’ home, where the woodsman is hanging birdhouses in the trees. He shows him letters and convinces him to donate the toys in his basement. Klaus agrees.
The boy is playing with his toy in the yard, and a little girl joins him. Their parents see this and quickly separate the two since they are from opposite clans. The children are brought to the clan leaders: Mr. Ellingboe (Will Sasso) and Mrs. Krum (Joan Cusack). They are told that the clans are not meant to mingle, and the reason they keep fighting with each other is because of tradition. The kids promise that it won’t happen again, but Mrs. Krum is wary.
Word begins to spread amongst the children about Mr. Klaus and how he comes down the chimney at night and leaves toys behind (and that he likes cookies). In reality, Jesper has been the one delivering the presents while Klaus just tags along. At one of the houses, Jesper realizes the boy who threw a snowball at him from earlier lives there and leaves a lump of coal in his stocking. At the post office, a Saami girl named Margu tries to ask for a present, but since she doesn’t speak English, Jesper ignores her. A few of the children tell him they don’t know how to write, so he decides to send them to Alva (since she’s the schoolteacher).
Alva, however, is not happy about this new development because she’s so close to being able to leave. The children insist on learning how to write their names, so she starts taking money out of her savings for school supplies. Meanwhile, the number of presents has increased so drastically that Jesper’s horse can’t pull the wagon anymore. Klaus gets the idea to wrangle up some nearby reindeer, which makes the wagon go faster.
The snowball boy confronts Jesper the following morning, demanding why he’s been getting coal instead of presents. On the spot, Jesper says that Klaus sees everything that the children do, and if they are naughty, they won’t get presents. The children start doing good deeds in hopes of staying in Klaus’ good graces. They clean up the town and act nicer to their neighbors. Their acts of kindness start to inspire the adults to do so as well. Alva is able to stop selling fish and start teaching. Soon the town is much happier, and everyone is getting along. But Mr. Ellingboe and Mrs. Krum aren’t happy with the changes. They realize Jesper is responsible for this and must be stopped.
Klaus is happy to hear that the town is doing better. He remarks, “A true selfless act always sparks another.” Jesper isn’t convinced, however. He believes everyone is always out to get something. Mr. Ellingboe and Mrs. Krum attempt to ambush them, but Klaus is able to maneuver them safely away. The wagon loses its wheels in the process, and they end up ramping over a cliffside. A boy looks out his window and sees the sleigh and reindeer airborne. The next morning, rumor has spread that Klaus has flying reindeer. This makes him laugh for the first time (“Ho-ho-ho!”).
Mr. Ellingboe and Mrs. Krum decide to meet late at night in the town square. The numbers of their clans are dwindling because of all the kind deeds. Mrs. Krum proposes a temporary truce so they can finally put a stop to Klaus. Mr. Ellingboe agrees, and the two shake hands. The truce is temporarily broken; however, when someone accidentally rings the “Battle Bell,” which starts another brawl.
Jesper notices that they are running low on toys. He gets the idea to make a huge delivery on Christmas, and Klaus can make more. Klaus claims he doesn’t do so anymore, but Jesper keeps insisting that they can turn Klaus’ home into a workshop. In his excitement, he accidentally finds a decorative shelf of the woodsman, a young woman (his wife), and several empty holes. Klaus angrily orders Jesper to leave.
Jesper returns to the post office and finds Margu waiting for him. He finally takes her to Alva so they can write her letter to Klaus in English. She wants a sled with a sail. Jesper brings the letter to Klaus’ home and starts to make it, but it looks very poor. Klaus eventually takes pity and helps him. They bring the present to Margu’s village (just slightly out of town) and leave it outside her tent. This time, Jesper stays behind with Klaus and watches her unwrap and play with the sled with her parents. Back at the house, Klaus finally talks about his wife, Lydia. They moved away from the village because they wanted to start a family. While they waited, he starting making toys. Sadly, they never had children, and Lydia died of an illness. He kept making birdhouses because of her love of birds. Klaus thanks Jesper for bringing joy back into his life and decides to go forward with the Christmas plan, even planning for the years to come. Jesper is hesitant because he still wants to leave Smeerensburg, but he can’t bring himself to tell Klaus the truth. He stops by the schoolhouse and is surprised to see it, and Miss Alva completely transformed, more so that Alva used up all her savings. She brings him the town square which has been completely decorated for Christmas and all the townspeople are mingling with one another.
Mr. Ellingboe and Mrs. Krum break into the post office and find Jesper’s chart of letters delivered. They begin making several fake letters and put them on Morgens’ boat since he handles all the outgoing mail. Margu brings her entire village to Klaus’ workshop to help prepare for the big night. Jesper brings Alva to the workshop and starts to consider possibly settling down in Smeerensburg. Christmas Eve has arrived. The Sami village have remodeled Klau’s sleigh and give Klaus a new red outfit.
The good mood is broken when Jesper’s father arrives; Mr. Ellingboe and Mrs. Krum invited him because over 14,000 letters have been delivered. Since he held up his end of the deal, he can go home now. Klaus and Alva are disappointed to learn about Jesper’s real intentions. At the docks, Morgens tells Jesper’s father that his son is the first postman to leave Smeerensburg unhappy; usually, the postmen that leave are the happiest. Margu arrives seemingly too late, but it turns out Jesper didn’t leave on the boat! He told his father the truth and was allowed to stay. On the mountain top, he notices the clans carrying torches towards Klaus’ home.
As the sleigh is being loaded with presents, the clans arrive to destroy them. Once kids stop receiving toys, they’ll eventually start fighting again, which will make the grown-ups fight again as well. Jesper jumps on the sleigh and tries to make a getaway, but it’s not connected, so they sleigh rolls downhill. The clans chase after them down the hillside. Klaus refuses to help because he’s still mad at Jesper. The bag is ripped, and toys begin to fall out. Jesper frantically apologizes while trying to close the bag. Mr. Krum’s gargantuan daughter, Pumpkin, almost falls to her death, but she’s saved by Mrs. Ellingboe’s son Olaf. Jesper manages to stop the sleigh from going over the cliffside. Still, Mrs. Ellingboe spitefully rips the bag further, and the presents fall.
Mrs. Ellingboe insists that the town will always be miserable as long as they’re in charge. Still, Jesper disagrees: a true act of goodwill always sparks another. To prove his point, Pumpkin and Olaf are no longer enemies, much to their parents’ shock. Turns out, the presents on the sleigh were just logs of firewood covered in wrapping paper. The real presents were back at the workshop safe. Alva found about the plan because the children told her about it at school, and she, in turn, told Klaus. Officially forgiven, Jesper and Klaus depart to deliver the presents. Christmas morning arrives, and the children eagerly open their presents. On a nearby hill, Jesper and Klaus sit and listen.
Life continues to improve in Smeerensburg. Pumpkin and Olaf get married, which makes Mr. Krum and Mrs. Ellingboe in-laws. Jesper and Alva marry and later have two children. Klaus’ present operation continues growing bigger and further. Jesper and Klaus remain friends until 12 years later when Klaus disappears to be with his wife. In the epilogue, Jesper kisses his children and Alva goodnight and sits down in front of the fireplace by the Christmas tree. He hears the sound of sleigh bells and smiles, ready to see his old friend again.