Krampus convinces Stan Smith of Langley Falls, Virginia, to free him after being trapped by Jack Smith decades ago, only to kidnap Steve and take him to his castle to spank him. Steve is comforted by the animated household items who convince him that Krampus only punishes children to simply mend their ways, not for his own personal enjoyment.
Meanwhile, Stan with the help of Roger frees Jack from prison to help him, only for Jack to take off, leaving Stan to enlist Santa Claus who still bears a grudge after events of the conflict between the Smith family and Santa following the incident with Steve shooting Santa in the first place using a machine gun given to him as a Christmas present by his father. Despite the animosity, Santa agree to help on the condition that they kill Krampus. Staging a raid on the castle, Santa and his elves attack and slaughters the household items and Krampus, before Santa turns the gun on Stan intending to kill him as well. Stan is saved by Jack who had a change of heart and takes the bullet meant for Stan. As his andKrampus' blood intermingles, Jack is transformed into the new Krampus.
- Krampus' Castle is somewhat loosely based on the real-life Neuschwanstein Castle which served as the inspiration Disneyland's Sleeping Beauty Castle.