Ollie Dee and Stannie Dum try to borrow money from their employer, the toymaker, to pay off the mortgage on Mother Peep's shoe and keep it and Little Bo Peep from the clutches of the evil Barnaby. When that fails, they trick Barnaby, enraging him.

In this Pacific Northwest Ballet performance, it is Christmas Eve and festivities are underway. Clara is excited when her godfather arrives with a bag full of gifts, one of which is an intriguing wooden nutcracker. That night, while the household sleeps, Clara visits the Christmas tree to inspect her nutcracker and soon finds herself immersed in a dream world both dark and enchanting.