It's Xmas time again and the Planet Express crew has just finished getting ready for Robot Santa Claus by covering the whole building in metal shielding. Relieved that all they have to do is stay inside, everyone starts to relax. The Professor then informs Fry, Leela, and Bender, of some "good news", they have been hired to deliver letters directly to Santa's base on Neptune. Reading the sad letters, Leela decides that it's her, Fry, and Bender's job to stop Santa once and for all.
Arriving on Neptune the team meets the Robot Santa's Elves who are actually Neptunians, they're "just small because Santa doesn’t feed" them. Leela decides to have them help in the plan. Delivering the letters to Santa, the Neptunians flee and Fry, Leela, and Bender jump out of the sack of letters. Leela attempts to destroy Santa with a logical paradox which should cause him to overload. Leela states to Santa that he is programmed to punish/kill the naughty, but that in turn makes him naughty and thus he must destroy himself. Faced with the paradox Santa's head explodes. Unfortunately, another head pops up and Santa tells them "Nice try but my head was built with Paradox absorbing crumple zones!", with that he pulls a bazooka on them and Fry, Leela, and Bender run for their lives.
Getting on their ship, the crew tries to take off but find that Santa is holding them down. Luckily, the heat from the rockets causes the ice around Santa to melt and he's frozen in place. The Neptunians celebrate and start making toys again, however Xmas is now left without a Santa and Bender is dubbed the new Santa. Arriving on Earth "Santa" tries to give out gifts but fails and people mistake him for the evil Robot Santa. He eventually gives up and dumps the toys in a sewer. He gets caught and is taken to court for crimes against humanity. Despite their best efforts Bender is found guilty and sentenced to be executed by being torn apart by giant magnets. Desperate, Fry and Leela decide to return to Neptune to retrieve Santa, who is still trapped in the block of ice to prove that Bender isn't the real Santa. After cutting him out of the ice, though still frozen in a block of it, Leela realizes that the pollution from the toy factory has caused a "Green House Effect" and raised the heat causing the ice to melt. Santa breaks free and chases Fry and Leela back onto the ship. With the previous one having failed, Leela decides that they need a new plan and they fly back to Earth. Though unknown to them Santa has hitched a ride on the ship, and is now headed to Earth with them.
At Bender's execution the Planet Express crew all dress up as Santa to save Bender, apart from Zoidberg who is dressed as Jesus. They fail and Bender starts being torn apart, while singing folk songs due to the magnet's effect on his circuit. Suddenly the real Robot Santa breaks in and saves Bender, Santa asks Bender for his help to "save"(ruin) Xmas. Fry warns him not to do it saying "No, don't do it, he's evil!", to which the real Santa replies "I know he is but I have no choice". Santa frees Bender and they both go on an evil rampage.
Back at Planet Express everyone is huddled together in fear. Leela complains that despite everything they did, Xmas ended up just as terrible as ever. They have no heat or power, and are all huddled together in fear. Fry realizes "the true meaning of X-Mas", all their fear of Santa brings them together, and though it be huddled in the dark, scared, and cold, that's the true meaning of Xmas. Meanwhile, after thoroughly destroying the city and ruining Xmas, Santa gives Bender a present as thanks, though Bender is confused when the box is empty. Santa says, "I might appear empty but the message is clear: play Santa again, and I'll kill you next year!". Santa viciously kicks Bender out of his sleigh in mid-air.