After witnessing his parents' murder at the hands of a man dressed as Santa Claus, Billy is sent to an orphanage run by a cruel Mother Superior. Throughout his childhood, he is constantly punished and told that Santa is not real and is instead a symbol of punishment.
As an adult, Billy is forced to work at a toy store during the holiday season, where he is asked to dress up as Santa. Despite his traumatic past, he reluctantly agrees. However, as he interacts with the children and is constantly reminded of his childhood trauma, Billy starts to lose his grip on reality.
As Christmas Eve approaches, Billy's mental state deteriorates further, and he begins to see anyone dressed as Santa as a threat. He goes on a violent rampage, punishing those he believes to be naughty in the most brutal ways possible.
The film culminates in a bloody showdown at the toy store, where Billy faces off against those who try to stop him. In the end, the truth about Billy's past is revealed, as well as the horrifying reason behind his descent into madness.