In California, the great-nephew of Andre Toulon and owner of the Toulon Doll Hospital Robert Toulon has found with his daughter Alexandra an ancient formula that brings the puppets back to life with his blood.
However, the devilish owner of the Share Toys, Erica Sharpe, who has made a deal with the demon named Bael, has a hidden camera in Toulon's place and discovers his secret.
She has the intention of using his formula to reanimate the Christmas Palls, a successful toy manufactured by her factory, to cause the greatest slaughter of innocents on the Christmas morning.
But Robert, together with his daughter, Sergeant Jessica Russell and the guardian's puppets Jester, Pinhead, Blades and Six Shooter fight against Erica, Bael and her evil toys to save the mankind.