Shortly before Christmas, a school hires a magician, Professor Hinkle, to perform for the students. Hinkle's assistant, the rabbit Hocus Pocus, steals his hat and puts it on Frosty who in turn comes to life. Once Hinkle discovers the hat's magic powers, he wants it back. In the meantime, Frosty realizes that if he doesn't travel north, he will melt. The snowman, the rabbit and their new friend Karen, parade through the town to the train station, to the astonishment of the townspeople.
The train brings the trio to the North Pole where Frosty is quite comfortable, but Karen is freezing. Unbeknowst to the trio, Hinkle has sneaked aboard the train, determined to get his hat back. Frosty finds a greenhouse full of poinsettias where he brings Karen to warm up. Hinkle discovers the trio and attempts to steal the hat. But Santa arrives just in time to catch Hinkle in the act. He warns the magician that if he doesn't apologize, he won't get any more presents for Christmas. Frosty's last words are "I'll be back on Christmas Day!"