Eubie the Elf (Rob Paulsen) loves working in Santa's workshop up at the North Pole,
despite the other elves' complaints about being annoyed by his overly
happy personality. One Christmas Eve morning, Eubie's boss, Norbert,
assigns him to checking the naughty and nice lists. However, while
checking the lists, Eubie discovers that every child in the town of
Bluesville is naughty and decides to go to Bluesville and spread
Christmas cheer.
Bluesville is a dark miserable town at the bottom of a very deep
valley, completely surrounded by tall dark cliffs. There, the
townspeople feel the warmth of the sun only once a day. They never
smile, they don't know how to tell a joke properly, most of them work at
the What Factory, where all the world's question marks
are made, and at the Bluesville school, recess only lasts one minute.
Eubie tries to brighten everyone's spirits, but his overly good mood
frightens them.
Eubie talks to the mayor about what is wrong with Bluesville and
if there's anything about Bluesville that makes him feel proud. The
mayor replies that Bluesville is the world's largest manufacturer of
un-burnable coal, which children enjoy throwing at people and at each
other. The mayor then makes a deal with Eubie. If he can find another
use for the coal, he'll put a Christmas tree up in the town square.
Eubie's first plan on getting the kids to help him make
Bluesville a happier place is having them gather on a busy street and
start a pie fight, but that only makes all the people angry. To search
for more help, Molly (Mae Whitman), a naughty 10-year-old girl, takes Eubie to downtown
Bluesville, the most miserable part of Bluesville, for a meeting of a
group called S.L.O.B. (Smile League Of Bluesville), which only has one
member of its group. While there, Molly and Eubie meets up with Curtis (Candi Milo), who is there because he brought along his foreign
friend, Oreg, who doesn't speak English, but is happy to be there.
Molly soon decides that Eubie's plans are hopeless, and tells him to
just take all his big ideas home. At the mention of that, Eubie gets
another idea, and is about to implement it when the lights in the room
go off and Eubie is taken back to the North Pole.
In his bid to get Bluesville off the naughty list, Eubie violated
several rules in one day. As punishment, Santa had Eubie turn in his
magic hat, which, at the North Pole, meant his Christmas happiness and
powers were taken away. When Gilda (Carol Kane)
hears this, she motivates Eubie to go back to Bluesville to finish his
job and gives him her hat to restore his powers and happiness. He then
returns to Bluesville and explains his plan to the children. That night,
they give the mayor of Bluesville a bottle of anti-snore medicine in
his sleep, while Eubie spends the night polishing all the cliffs
surrounding Bluesville with a jar of super-duper un-burnable coal
polish. While he is doing this, Derek notices Gilda doesn't have her hat
on, he soon figures out what is going on and, trying to follow the
North Pole rules, he notifies one of the higher-ups.
After polishing the cliffs, Eubie is taken back to the North Pole
again where he and Gilda are put on punishment and are sentenced to
clean up the toy factory, with both their hats taken away. Derek, now
alone at the Christmas party, is sad and mad with himself for betraying
his friends, and confesses to what he did to Eubie and Gilda. They
forgive him, but it only makes him feel worse about himself, considering
what he did to them. While wondering what he can do to make it up to
them, they have him do the one thing Eubie intended to do to finish
making Bluesville a happier place.
When the sun shines over Bluesville again, it reflects off the
polished coal, lighting up the town and making everyone happy. At the
What Factory, the machine now makes different colored exclamation points
of all shapes and sizes, delighting the workers. At the school, when
recess starts, the bell has an elf's shoe placed over it, which means
the kids can play longer. Molly comes out of the school where Derek
meets her. He tells her to find the mayor and give her the jar of coal
polish Eubie used to polish the cliffs, and a piece of coal that was
squeezed into a diamond and to tell her that Eubie was sorry he couldn't
be there. Molly happily goes to find the mayor, but stays for a while
to allow Curtis to tell a joke that's actually funny, thanks to the joke
book Derek gave him. Molly finds the mayor and shows him the items,
which meant that there was indeed another use for the coal. He then puts
up a Christmas tree in the town square and everybody celebrates, thanks
to Eubie.
That Christmas, Santa decides to make Eubie, Gilda, and Derek his
sleigh crew that year for bringing joy to Bluesville, which has soon
changed its name to Joyville.
The movie takes place in the year 2000, as one elf is shown using
Windows 2000, which was only the most up-to-date Windows version for
the period of February 17, 2000 to October 25, 2001. It is also made
clear that it takes place in the 2–3 days coming up to Christmas,
meaning it takes place on December 22–24, 2000.