It's getting close to a very special day—Punky and Henry's first Christmas together, and she is saddened that it will be her first Christmas without her mother, Susan. When he tells her about some of his childhood memories of Christmas, she tells him that she misses Susan. At school, a bully named Billy Bahootsas (Danny Ponce) tells her and her friends that there is no Santa Claus, and after she gets home, Henry tells her that Santa is real and can do anything, but she is still not convinced, and neither is Cherie. While they are out of earshot, Henry tells Betty that there has to be a way to convince them, which gives her an idea—she tells him that the school is having an awful hard time trying to find someone to play Santa for Punky's class, and she suggests that he should do it. With a little coaxing from her, a reluctant Henry agrees. At the school, Santa shows up in Punky's classroom, and none of the kids know that it's really Henry. When it's her turn to talk to him, Punky asks him for just one precious gift—Susan. Later, at the photography studio, as Betty helps him out of the Santa suit, he vows to find Susan.
Henry begins his search for Susan. After Punky puts a gift under the tree for her, his detective friend, Gene Doucette, calls, giving him a promising lead that there is a woman named Susan who's in the hospital suffering from exposure, and she fits Susan Brewster's description. He heads there, and it turns out that she's not Susan Brewster—it's comically hinted that she's a prostitute. While he's on his way home, a blizzard sidetracks him on Michigan Avenue at Nick's Nook, an antique store run by an old man named Nick (Iggy Wolfington), and there is something about him—especially since this is the part of Chicago that Henry was raised in, and he doesn't remember that store ever existing on Michigan Avenue. Nick tells him that miracles can happen, and he offers to give him a free jewelry box for Punky, but he turns it down. On Christmas morning, she wakes up and can't find Susan in the apartment...but when she opens her gifts, she notices one that wasn't there before. It's from Santa, and it's a jewelry box just like the one Nick tried to give to Henry, and she knows it's Susan's because her initials are on it. Also, her gift to her is missing. She understands that she couldn't be there, so Santa took the gift to her and left the jewelry box for Punky, who has a great Christmas after all. On a hunch, Henry calls information, and he asks for the phone number of Nick's Nook, but he's told that it doesn't exist. He's now convinced that Nick was Santa.
The two-part episode was included on the Punky Brewster: Season One DVD set, released by Shout! Factory on June 1, 2004.