In 19th century Germany, Clara Stahlbaum, her younger brother Fritz and their family celebrate Christmas Eve, though Clara is jealous that her older sister Louise already has a boyfriend, leaving her wondering about growing up. She immediately cheers up when Drosselmeier, an eccentric toymaker and family friend, arrives at their home with special gifts: a fully automated toy castle for everyone, and a Nutcracker for Clara. While trying to crack nuts with it, Fritz damages the Nutcracker. To cheer the heartbroken Clara up, Drosselmeier tells her a story about how the Nutcracker came to be the Prince of the Dolls.