Ever since they were kids long, long ago, Fred Claus (VINCE VAUGHN) has always been jealous of his younger brother, Nick (PAUL GIAMATTI), mainly because of the attention their mother, (KATHY BATES), paid to Nick. That was cemented forever when his little brother became Saint Nick, a.k.a. Santa Claus, and thus froze them at their current ages for all eternity.
Now in the present day, Fred is a bitter repo man who only cares about himself, thus meaning he doesn't treat his meter maid girlfriend, Wanda (RACHEL WEISZ), the way he should, even going so far as forgetting her birthday. While he does spend some time with a neighbor kid, Slam (BOBB'E J. THOMPSON), he's most interested in opening an off-track betting parlor.
However, he doesn't have the money to secure the spot, and thus calls on his brother for a loan. As it's near Christmas, Nick is quite busy, and his wife, Annette (MIRANDA RICHARDSON), wants Santa to practice some "tough love" with his brother and not give him the money. Having a heart of gold, though, Nick can't turn down his big brother, but does so with the caveat that Fred must travel to the North Pole and work for the money. Accordingly, head elf Willie (JOHN MICHAEL HIGGINS) picks up Fred and delivers him to the toy factory at the top of the world.
There, he meets the likes of Santa's little helper, the cleavage-sporting Charlene (ELIZABETH BANKS), as well as DJ Donnie (CHRIS "LUDACRIS BRIDGES) who spins the same tune over and over again for the factory workers. Then there's Clyde Northcutt (KEVIN SPACEY), an efficiency expert from a company that oversees all holiday operations, and he seems intent on finding anything that might justify him shutting down Nick and his North Pole operation.
As Fred works in the naughty and nice kid sorting office, he disrupts the normal routine to such a degree that he ends up unknowingly helping Clyde's cause. With the big day quickly approaching, he must then decide what to do and whether to help his brother save Christmas.