A man claiming to be Santa Claus arrives in Orlando, Florida, where Ernest P. Worrell works as a taxicab driver.

During their drive, a runaway teenage girl named Harmony Starr joins Ernest and Santa in the taxi.

Santa becomes worried when he discovers his sack is missing and feels discouraged due to his increasing forgetfulness at the age of 151.

To restore its full strength, he must pass the job on to someone else, which is why he needs to find Joe and make him the new Santa Claus before 7:00 PM.

Marty pressures Joe to abandon his focus on teaching goodness to children and instead take a role in a horror film called Christmas Slay, which deeply offends Santa.

Joe initially declines but later changes his mind when he refuses to use foul language in front of the children on the film set.

On Christmas Eve, Ernest and the helpers meet Santa's elves at the airport, retrieve the reindeer and sleigh, and fly to the children's museum.

Santa resumes his identity as Seth Applegate and spends Christmas Eve with a museum employee named Mary Morrissey.

[citation needed] The Lake Mary studios of then-Fox affiliate WOFL-TV (channel 35, which is now owned by Fox itself) were used for the Christmas Slay film scenes, as the station already had a promotional relationship with Jim Varney and the Ernest character.

[4] Ernest Saves Christmas was released theatrically in the United States by Buena Vista Pictures Distribution on November 11, 1988.

[10] In its opening weekend, Ernest Saves Christmas placed second at the box office behind Child's Play and grossed $5.7 million from 1,634 theaters.