The Bikini Bottomites decorates for Christmas as SpongeBob and Patrick sings a song. Everyone in Bikini Bottom, except Squidward, is excited at the idea of Santa Claus bearing gifts, and they all, except Squidward, put their Christmas letters into glass bottles, which are then shot up to the surface for Santa to receive as the act ends. Later at the Krusty Krab, SpongeBob passes the story of Christmas on to Patrick, Squidward, and Mr.
After recovering from the drenching, Sandy is shocked to find out that SpongeBob has never heard of Christmas, and tells him all about it. Inside, Sandy is putting up Christmas lights, which SpongeBob mistakes for fire and tries to put it out with sea water. Outside Sandy's treedome, SpongeBob is dressed in his karate gear and preparing to give Sandy a surprise sneak attack. Patchy remarks that there was once a time when Christmas in Bikini Bottom was unheard of, and decides to tell the tale. Patchy also takes time to open a letter from a fan, who asks if SpongeBob likes Christmas as much as he does. With the help of his unenthusiastic assistant, Potty the Parrot, Patchy sets pictures of SpongeBob and Patrick on the mantelpiece, puts up his various SpongeBob-themed ornaments, and bakes Christmas cookies, the dough of which Potty eats. As the special opens, it is almost Christmas in Encino, California, and Patchy the Pirate, president of the SpongeBob SquarePants fan club, is deep in preparations for the holiday.