It's Christmastime in Rudolph, New York, which means it's time for the December Santa Claus parade. This year, shop owner Merry Wilkinson has decided to decorate her float as Santa's elves' workshop and invites her landlady, Mabel D'Angelo, to help supervise the excited children playing the elves. But when Mrs. D'Angelo doesn't show up, Merry begins to worry.

Worry quickly turns into frustration when Mrs. D'Angelo reveals she was delayed by new neighbors moving in. As the center for all things gossip, Mrs. D'Angelo is determined to introduce the new arrivals to the neighborhood. As the days pass, Mrs. D'Angelo notices strange things about the newcomers, but Merry, busier than an elf in Santa's workshop, has little time for matters that really don't concern her. But things turn from jolly to downright concerning when Mrs. D'Angelo disappears, and Merry is forced to admit that something might be terribly wrong.

With family and friends counting on her during this stressful holiday season, it is up to Merry to make sure this Christmas doesn't end up wrapped in blood red.