It's three days before Christmas, as the conductor aboard the Toyland Express, Humpty Dumpty, meets two children, Jack and Jill, who are on their way to Toyland. After meeting Tom Piper, and Mary Lamb, who runs her late father's toy factory, they go to live with their uncle, the evil Barnaby Crookedman, who doesn't believe in toys and keeps Jack and Jill in the attic. He has plans to shut down the toy factory, and earlier shot down Tom's hot air balloon as he was flying over the Goblin Forest in an attempt to get him eaten by goblins (and is quite shocked to see him alive).
Jack and Jill sneak out and go to the Toy Factory, which had received a big order from Santa Claus requesting a thousand giant toy soldiers. Jack and Jill offer to help, but Barnaby takes them back to the attic of his house and threatens to send them to the Goblin Forest if they go near the toy factory again. Shortly afterward, he hires two pirates named Gonzargo and Rodrigo to sabotage the toy factory. Jack and Jill sneak out and go to the toy factory again, where Gonzargo and Rodrigo, disguised as sheep, drop a monkey wrench into one of the machines, but Jack is able to remove it before the machine can explode. Jack and Jill immediately suspect Gonzargo and Rodrigo, though believing them to be sheep, and chase after them, resulting in Rodrigo and Gonzargo being knocked into a well by a ram and Jack and Jill, respectively, get knocked down by an empty pail and fall down the hill again.
Barnaby catches Jack and Jill and orders Gonzargo and Rodrigo, who expose the children's interference with the sabotage, to take them to the Goblin Forest. There, they meet the evil Goblin King who tries to eat all four of them. Mr. Dumpty informs Tom and Mary, who go to the forest to rescue them. As the goblins are weak against light, they use a flashlight to fight them off and escape. Barnaby knocks Mr. Dumpty over a bridge (while giving a mockery saying of the nursery rhyme which bears the egg's name) for the key to the factory and tries to enter it, but is stopped by Tom, Mary, Jack, Jill, Gonzargo, and Rodrigo, and is forced to retreat.
Tom and Mary finish the Toy Factory's order and fall in love, but Barnaby leads the goblins to Toyland, where they invade, setting fire to the buildings and roasting Gonzargo and Rodrigo on a spit. Tom activates the toy soldiers, who soundly defeat the goblins and put out the fire, saving all of Toyland (including Gonzargo and Rodrigo). Barnaby insults the Goblin King, who tries to eat him, but Jack and Jill shine a flashlight on him, and all the toy soldiers do the same, destroying the Goblin King. Barnaby calls him a "pathetic ogre", and the other goblins confront him and chase him off, out of Toyland (though whether they finally catch him and eat him is unclear).
Finally Christmas arrives; Tom has repaired Mr. Dumpty. Santa transforms all the giant toy soldiers into small toy soldiers. He notices Barnaby's cat, Scat, who is now homeless since Barnaby's disappearance; he picks him up and pets him. Jill asks for Scat and she gets him, and Santa continues on his journey.
In the end, Jack and Jill become the adopted children of Tom and Mary.
- Joseph Ashton as Jack
- Lacey Chabert as Jill
- Raphael Sbarge as Tom Piper
- Cathy Cavadini as Mary Lamb
- Christopher Plummer as Barnaby Crookedman
- Charles Nelson Reilly as Humpty Dumpty
- Jim Belushi as Gonzargo
- Bronson Pinchot as Rodrigo
- Lindsay Schnebly as Goblin King
- Susan Silo as Scat
- "Toyland" - Humpty Dumpty
- "Mr. Dumpty's Toyland / The Aerial Ballet" - Humpty Dumpty
- "Dream" - Mary, Tom, Jill, Jack
- "The Factory Song" - Tom, Mary, Company
- "A Crooked Man" - Barnaby
- "The Worst Is Yet to Come" - Gonzargo, Rodrigo
- "It's You" - Tom, Mary