The film is narrated, and begins with Santa Claus delivering presents on Christmas Eve. In the fictional rural farming community of Twobridge, Tennessee, a calf is born on Christmas Eve, which the narrator says is a night made for wishes. Grandpa Charles Baker lives on a farm with his grandson Billy, who is friends with a girl named Emily. When Grandpa's truck sputters out in front of the Holder Farm, Bucky and Buster Holder rush out and mock Billy for his muteness; Emily defends Billy, Grandpa tries to be a mediator, and Gus Holder orders them off his property. In the city, Billy's Aunt Agnes, a wealthy and snobbish perfectionist, prepares for her "perfect" Christmas, but realizes something is missing. Agnes decides that she wants a child, and visits her lawyer, who explains that when her brother (Billy’s father) died, she had given up all rights to guardianship of his son, Billy. Agnes demands her lawyer to find a loophole. At the farm, Grandpa reminisces about a barn fire, after which a doctor stated that Billy would never talk again. It is implied that Billy's parents died in the blaze. Later that evening, Santa arrives and dusts the animals with magic powder; it is revealed that animals are given the ability to speak on Christmas. After conversing with them, Santa meets the calf and names her Annabelle. Upon meeting Santa, Annabelle becomes fascinated with his reindeer and their ability to fly, and wishes to fly herself. Santa leaves reminding the animals that their speech ability must be kept secret. On Christmas morning, Agnes arrives and gives gifts to Billy, which he dislikes. Billy then learns that Santa's gift to him is Annabelle. When Billy sneezes in the barn, he is surprised to hear Annabelle say "bless you", revealing that animals can talk. The animals convince Billy not to reveal the secret, leading to Annabelle's shock of his inability to speak. Before she leaves, Agnes makes it clear to Grandpa that she wants Billy. Emily's new snow sled is tied to Annabelle, who pulls it with Emily and Billy on board, but they crash into and destroy Mr. Holder's fence. Holder smugly wonders how Baker is going to pay for the damages to his fence and feed Annabelle. Holder then calls the sheriff. At the barn, Annabelle's mother Star recounts the incident involving the fire and that Billy is unable to speak because of it. Annabelle then decides what she wants to do next year when she meets Santa, followed by a dream of her flying throughout the sky. The next morning, the animals lose their ability to talk, which makes Billy wonder if he imagined the whole thing. The sheriff and the Holders arrive with Mr. Holder demanding the money for fence repairs. Knowing that Baker does not have the money, Holder takes away Annabelle; the sheriff explains that if Baker can get the money to repair the fence in 24 hours then Annabelle will be returned. Billy is devastated as the Holder boys drag away Annabelle. Grandpa decides to sell a music box that belonged to his daughter (Billy's mother), even though it is the only thing he has left of her. The next morning, Grandpa sells the music box, and the sheriff retrieves Annabelle, who has a joyous reunion with Billy. Billy, Annabelle and Emily spend the year together as friends. Winter comes again, and the Holder boys still bully Billy and Emily; Annabelle retaliates by knocking the boys into the snow. The boys try to feign innocence, but their father learns the truth about them and sends them to their room as punishment. The sheriff tells Holder that his attitude has turned his boys into lying bullies and that he has spread his misery to others through his actions. The sheriff also reveals that Baker had to sell his daughter's music box to retrieve Annabelle and that he should know the loss of a loved one, hinting that Holder lost his wife years ago. Holder feels ashamed. In the city, Agnes' lawyer has discovered a loophole that will give Agnes custody of Billy by Christmas Day. Months pass until Christmas Eve, and Agnes shows up triumphantly at how she has obtained the right to care for Billy. The loophole states that Agnes will have custody of Billy and his welfare until he is able to speak and if Grandpa interferes she will call the police. The animals, overhearing this, push Agnes' car into a pond, delaying her plan until the next day. Grandpa and Billy are happy that they will at least spend one more Christmas together. That evening, Santa arrives and once again gives the animals the ability to speak. Annabelle then whispers a wish into Santa's ear and asks him to fulfill it. On Christmas, Billy begins speaking again after opening a Christmas present box from Santa that contains magic dust. Agnes arrives and is surprised to learn that her plans to take Billy are nullified. Billy goes to see Annabelle, but she can only moo now. Star explains that Annabelle permanently gave up her Christmas voice so he could speak again. When Billy asks about Annabelle's desire to fly, Star restates that hearing Billy speak was Annabelle's true wish. Mr. Holder apologizes to Baker and reveals that after learning about the music box, he felt ashamed and decided to buy it for Baker as a Christmas present. Agnes meets Holder and his boys, and the narrator implies that she married Holder and became a stepmother to the boys. Several years later, Billy grew up and married Emily and Annabelle became an old cow. It is then revealed that Billy is the narrator, and that he still talks to the animals, which baffles Emily. On Christmas Eve, Santa grants Billy's wish for Annabelle's earlier desire to become a reindeer. Annabelle also becomes young again and regains the ability to speak, before flying off with Santa and his other reindeer.
