The action takes place in an old German town, at the beginning of the 19th century.

It is Christmas Eve, and the streets of the town have a holiday air.

The house of the Stahlbaum family is brightly illuminated. Guests assemble in the festively decorated drawing-room.

Drosselmeier enters. The eccentric old man is an ingenious toy-maker and a great favorite with the children.

He has brought many presents for them. One of the toys falls to the floor. Drosselmeier picks it up and hides it behind the music stand of the grand piano. The toy is a Nutcracker, the most interesting of his presents.

Everything is ready for the party to begin. The children come running into the drawing-room; Franz, the son of the master of the house, comes in first, riding a hobby-horse.

The boys march round the Christmas tree, rifles on their shoulders.

Then the children start a game of blind-man's-bluff in which Drosselmeier also takes part. They tie a handkerchief round his eyes.

The first child he catches is Stahlbaum's little daughter, Masha, who is not quick enough to keep out of his way. Drosselmeier and Masha begin to dance, and the other children follow suit. After a while, they leave the room still dancing.

Drosselmeier now appears in the guise of a magician and prepares to perform conjuring tricks. He begins by presenting a puppet show called, "The Mouse King Plots to Carry off the Princess, but the Brave Nutcracker Kills the Mouse King and Rescues the Princess."

Drosselmeier's stock of surprises is inexhaustible. He makes believe that he is looking for some new ingenious toy. The children follow him cautiously. Suddenly a clock-work harlequin appears behind them.

A dancing doll is produced next. Then, out of a mysterious bandbox pops up a little black boy.

But the most exciting present is the Nutcracker. After a long search, it is discovered on the grand piano. Masha admires it more than all the rest of the toys.

Franz, too, wants to play with the new doll. He pulls it away from Masha, but the Nutcracker's head comes off in his hand.

Drosselmeier repairs the Nutcracker in no time.

Masha caresses and comforts her favorite. Franz and his friends frighten her.

There is more dancing before the party breaks up. The oldest of the guests steps out, with comic importance, to dance the old-fashioned Grossvater.

The guests leave. The candles on the Christmas tree go out. Masha kisses the Nutcracker good night. The nurse takes her away to bed.

All the objects assume a fantastic appearance. A mouse scurries out of a hole, then lots of mice scamper out from everywhere.

In the silence of the night the clock is heard striking midnight. The owl on the clock flaps its wings. The mice squeak and run about the room.

The Christmas tree grows taller and taller until it becomes gigantic in size. The room swarms with mice.

Masha, terribly frightened, scrambles into an armchair. The toys who have come to life rush here and there in fear. The Mouse King himself enters.

But here the Nutcracker, at the head of his regiment of tin soldiers, comes forward in defense of Masha. Drawing up his little army, he leads it into attack. There is a battle. Masha anxiously watches her favorite.

Overcoming her fear, she runs up to him and at the crucial moment throws her little slipper at the Mouse King, thus saving the Nutcracker.

The Mouse King is defeated and disappears with his army.

Drosselmeier transforms Masha and the Nutcracker into a lovely maiden and a handsome youth. They set off for Fairyland.

They are surrounded by butterflies, then assaulted by horrible bats. The Nutcracker drives off the bats, and the island is turned into a beautiful sunlit garden.

Festivities begin. A Spanish dance is followed by Arabian and Chinese dances. Then comes the Ukrainian gopak and the Waltz of the Flowers. Masha and the Nutcracker are happy and dance merrily with the rest.

Masha is asleep. Day is breaking. The wonderful dream is over. Masha wakes up.