It's been eight years since Scott Calvin (TIM ALLEN) took over the job of Santa Claus with the help of lead elf, Bernard (DAVID KRUMHOLTZ), and things have been going well. That changes, however, when Santa learns that his teenage son, Charlie (ERIC LLOYD), has been placed on the naughty list for acting up at school and getting on Principal Carol Newman's (ELIZABETH MITCHELL) bad side.
It gets worse when Curtis (SPENCER BRESLIN) the elf informs Scott/Santa of a just realized stipulation in his agreement to act as Saint Nick. It seems that he has to get married by the upcoming Christmas Eve lest he lose his Santa privileges and powers and the North Pole operation be shut down.
With only 28 days to go, Santa isn't sure what to do, but Curtis comes up with an idea. If they simply make a duplicate of Santa and pass him off as the real thing to fool the elves, then Scott can return home and deal with his various familial issues. Santa, who's quickly reverting into Scott with a rapidly disappearing beard and waistline, reluctantly agrees and heads home.
Once there, and with a limited amount of magic to use, Scott must not only deal with setting Charlie straight with the help of ex-wife Laura (WENDY CREWSON), her husband Neal (JUDGE REINHOLD) and niece Lucy (LILIANA MUMY), but also the task of finding a wife. At the same time, the duplicate Santa (TIM ALLEN), quickly adapts to his surroundings, adopts the real Santa's ways and then sets out to change things due to his growing despotic nature.
With the help of the various elves, reindeer in training Chet, and even The Tooth Fairy (ART LAFLEUR), Scott sets out to accomplish his various goals and stop the evil duplicate Santa before children around the world are disappointed come Christmas Day.