The Pajanimals grandmother is coming over to eat their house, and this is a problem because the Pajanimals have forgotten their manners. They slurp, burp and don't act polite. They visit with Edwin the magician in Storybook Land, who is playing the role of a king, who teaches them proper manners.

The Pajanimals are celebrating Christmas. Apollo made a rocket to hang on the tree, Cowbella made a snowflake, and Squacky is excitedly wrapping presents. It's even started to snow, and they're excited about building snowmen. Squacky's thoughts have turned to giving away his old toys in anticipation of receiving the Fantastic Splash Super Sub Tub. The Pajanimals remind Squacky, though, that Christmas presents are always a surprise, and he begins to get worried and can't sleep. The Pajanimals decide to visit The Moon, who is dressed up in a Santa hat. Taking a look down the Earth below, the Pajanimals gain some perspective, and the Moon helps them to see that the excitement of Christmas is about more than just presents. Together, they all sing "Jingle Bells," and Squacky realizes he'll still be happy even if he doesn't get the Fantastic Splash Super Sub Tub.