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It's Christmas time on the Island of Sodor and Edward and Thomas are at Brendam Docks. Thomas is shunting trucks of presents. Both engines agree that Christmas is their favorite time of the year. Salty trundles over and admires the presents train before Thomas heads of to Knapford with it. Edward asks Salty if he likes presents and parties, but Salty explains that he does not have time for presents or parties. He goes on to remark that all he needs is a story and he rolls away. Edward is sure that a story can't be all that Salty needs and decides to find Salty a Christmas present. Edward is sure that Victor will have something that Salty will like and heads off.
At the Steamworks, Edward tells Victor about his plan to give Salty a present. Victor is happy to let Edward puff around the Steamworks to find something. Inside, Edward pulls up to Rosie, who is very happily being painted. Edward decides to take Salty a pot of paint as a present. Back at the docks, Edward presents Salty with a pot of bright green paint. This reminds Salty of a story about green paint. Salty tells Edward the story of how he was once painted green and no one could find him as he blended into the surroundings. Salty thanks Edward for his kindness, but turns down the pot of paint.
Edward returns to the Steamworks where he explains that Salty did not want to be painted green. Kevin suggests that Edward take Salty a fancy funnel. Edward is puzzled as Salty is a Diesel engine, but Kevin thinks that Salty will appreciate a fancy funnel anyway. Edward agrees and heads back to the Docks with it. Once there, Edward shows the fancy funnel to Salty. It reminds him of a story where he was once given a similar funnel. After Cranky had placed the funnel onto Salty, it fell off and rolled into the sea. Again, Salty thanks Edward, but declines the fancy funnel. Edward thinks it is a good story, but still wants to give Salty a Christmas present.
Edward returns the fancy funnel to Kevin at the Steamworks and then sets off to find another present for Salty. As he steams along, Edward spots some Christmas trees close to the track. Edward is sure Salty would like a tree and takes one back to Salty. The tree reminds Salty of yet another story. He recalls the time he was given a Christmas tree, but the sea air killed it. Salty thanks Edward, but can't possibly take the tree. Edward is upset as he has not found a good present, but Salty assures Edward that he has given him a very good present; a story to tell.
Thomas, Percy, Gordon, and Emily arrive in time to hear Salty's new story about a very kind engine named Edward who wanted to give an old Diesel a Christmas present. All the engines enjoy the story. Then the Fat Controller arrives dressed as Santa Claus. He wishes all of the engines at the docks a merry Christmas. They all blow their whistles and Edward blows his loudest of all.