The Silberhaus family and friends have gathered in the parlor around the Christmas tree, where the children receive presents. Suddenly, a mysterious figure enters the room. It is Herr Drosselmeyer, a local councilman, magician, and Clara and Fritz's godfather. He is also a talented toymaker who has brought with him gifts for the children, including four lifelike dolls who dance to the delight of all. He has yet another toy for them: a wooden nutcracker carved in the shape of a little man. The other children ignore it, but Clara immediately takes a liking to it. Fritz, however, purposely breaks the toy. Clara is heartbroken.
During the night, after everyone else has gone to bed, Clara returns to the parlor to check on her beloved Nutcracker. Suddenly, mice begin to fill the room, and the Christmas tree begins to grow to dizzying heights. The Nutcracker also grows to life-size. Clara finds herself in the midst of a battle between an army of gingerbread man soldiers and the mice, led by the Mouse King. When the Mouse King advances on the still-wounded Nutcracker, Clara throws her slipper at him, distracting him long enough for the Nutcracker to stab him.
Off to the Land of Sweets
Clara arrives in the Land of Sweets, ruled by the Sugar Plum Fairy in place of the Prince until his return. The Prince recounts for the Sugar Plum Fairy how he had been saved by Clara from the Mouse King and had been transformed back into a Prince.
In honor of Clara, a celebration of sweets from around the world is produced: chocolate from Spain, coffee from Arabia, and tea from China all dance for their amusement; candy canes from Russia; Danish shepherdesses perform on their flutes; Mother Gigogne has her children emerge from under her enormous skirt to dance; a string of beautiful flowers perform a waltz. To conclude the night, the Sugar Plum Fairy and her Cavalier perform a dance.
The Nutcracker Doll is under the Christmas tree. Clara awakes, thinking it was all a dream, but then finds her crown sitting beside her, leading her to question, was it a dream? She walks to the Christmas tree and takes her Nutcracker, going back to sleep, the implication being that if it was all a dream, that she would want to keep dreaming.