When Herr Drosselmeyer, who is also Clara’s godfather, comes to the house, magical things always happen. Every year he creates delightful toys unlike anything else in the world. This year he has some very special surprises for Clara and her family. Although Clara loves the lifelike Spanish doll, and Fritz the exciting Chinese doll, they cannot be left for the children to play with. Instead, Drosselmeyer has another very special and unusual gift, a remarkable nutcracker that he gives to Clara. Angered that he too cannot crack nuts with his teeth, Fritz regrettably breaks the nutcracker. Drosselmeyer is quick to repair the nutcracker for Clara, but Fritz is still looking for trouble and finds a rat with which to tease Clara.

Once all the guests leave the party, the Stahlbaums go to bed. Clara is awakened by a strange sound. Worried that her nutcracker is alone downstairs, she goes to find him and falls asleep on the couch. Suddenly, mice surround her. Drosselmeyer is acting very strangely and her nightmare continues as the whole house transforms around her. A menacing Mouse King orders his minions to steal the nutcracker from Clara. The Spanish and Chinese dolls come to help her, but the marauding mice carry them off. Just when Clara thinks all is lost, her nutcracker suddenly comes to life and temporarily scares the mice away. A huge battle between the toy soldiers and the mice follows. The Mouse King is about to defeat the nutcracker, but Clara saves the day. She discovers that by defeating the Mouse King, she has freed the Prince, who had been trapped in the nutcracker, and she understands that Drosselmeyer had a purpose in all the strange things he had done that night. Clara and her Prince pass through a wondrous snowy land as they begin their journey together to his home in the land of the Sugar Plum Fairy.

Act II
News that the Prince is finally returning home reaches the land of the Sugar Plum Fairy, where people from all corners of the world — and the world of the imagination — come to greet Clara and her Nutcracker Prince. After hearing the story of Clara rescuing the Prince, the Sugar Plum Fairy arranges a grand celebration in Clara’s honor, filled with many wondrous surprises, including being reunited with the Spanish doll. “This must be what it’s like,” Clara thinks, “to be inside one of Godfather’s inventions.”

Sadly, the night comes to an end. Even though Clara wants to stay, it is time to leave this enchanted land. Like a wonderful dream, this magical night will stay with her forever.