While not prosecuted for obscenity, the film was seized and confiscated in the UK under Section 3 of the Obscene Publications Act 1959 during the video nasty panic.
In suburban New Jersey, on Christmas Eve 1947, a young boy named Harry Stadling sees his mother being sexually groped by his father, who is dressed up as Santa. Heartbroken, the child rushes up to the attic and cuts his hand with a shard of glass from a shattered snow globe.
Thirty-three years later, an adult Harry (Brandon Maggart) now works in a low-level position at the Jolly Dreams toy factory. At home, he has taken it upon himself to become the next true Santa: he sleeps in costume, and his apartment is resplendent with Christmas toys and décor. From the roof of his building, he uses binoculars to spy on neighborhood children to see if they are being "bad or good". He sees two "good" children doing household chores and playing with their dolls, but finds a third child, Moss Garcia, rifling through a Penthouse magazine and cutting out a nude photograph. Harry runs back home and writes Moss's name in his "Bad Boys & Girls" book.
On his way home, Harry peeps into the window of a local bar and sees coworker Frank Stoller, who earlier that day had phoned in sick, requiring Harry to take his place on the assembly line. Harry becomes angry and rushes home, hums a Christmas tune, and breaks one of his male dollhouse figures. The following morning he phones his younger brother Phil (Jeffrey DeMunn) and cancels Thanksgiving dinner.
At the company Christmas party, the owner of Jolly Dreams announces that, if production increases sufficiently, the company will be able to donate toys to the disadvantaged children at Willowy Springs State Hospital. Afterwards, Harry is greeted by coworkers Ben, who thanks him for taking Frank's place at the warehouse, and Frank, who introduces him to new employee George.
At home, Harry realizes that people generally consider him a "schmuck", and is constantly exploited by others. He has a nervous breakdown, becoming convinced that he truly is Santa Claus. Down in his basement workshop, he begins smelting toy soldiers with swords at attention and small axes.
In his Santa suit, Harry breaks into the factory after hours to steal toys which he wraps, loads into his van, and drops off at the hospital. He then leaves a bagful of dirt at "bad boy" Moss Garcia's doorstep. Three preppies leaving a midnight mass taunt Harry about his Santa suit—and he murders them with an axe. Coincidentally, Frank and George are also attending the midnight mass, and witness "Santa's" bloody crime.
Later that evening, Harry sneaks into his brother Phil's home, destroys his nephews's Jolly Dreams gifts, and delivers the newly minted soldiers, as well as toys from his own workshop. He then breaks into Frank's home and murders him in his bed, leaving toys behind for his kids.
Christmas morning, Phil begins to suspect something is seriously wrong with his brother and argues with his wife Jackie. Their children are preoccupied with watching a television program and do not seem to mind playing with their damaged and subpar toys.
Harry returns to Jolly Dreams and activates the assembly lines, breaking even more toys in the process. That night, his Santa suit disheveled and dirty, he drives off, and his van becomes stuck in mud on a beautifully decorated street with plenty of lights, sending him further into a delusional state. Residents recognize him as the hatchet murderer, and form a torch-bearing mob to pursue him. Harry manages to free his van from the sludge and drives to his brother's house.
Phil quickly realizes that his brother is the homicidal Santa announced on the news and proceeds to choke him unconscious. He loads him into the front seat of the van, whereupon Harry comes to, coldcocks him, and again drives off. During his escape, the oncoming mob forces him and his van off a bridge; in Harry's mind, the van is shown to fly off into safety as a voice-over reads the end of "The Night Before Christmas".Brandon Maggart as Harry Stadling
Jeffrey DeMunn as Philip Stadling
Dianne Hull as Jackie Stadling
Andy Fenwick as Dennis Stadling
Brian Neville as Marc Stadling
Joe Jamrog as Frank Stoller
Peter Neuman as Moss Garcia
Lance Holcomb as Scotty Goodrich
Elizabeth Ridge as Susie Lovett
Chris Browning as Richie Sharp
Tyrone Holmes as Frankie
Patricia Richardson as Mrs. Garcia
Wally Moran as Young Philip Stadling
Gus Salud as Young Harry Stadling
Ellen McElduff as Mrs. Stadling
Brian Hartigan as Mr. Stadling
Mark Chamberlin as Charles
Critical reception for the film has been mostly positive. AllMovie gave the film a positive review, complimenting the film's unique editing style, cinematography, music, and sense of humor, concluding, "Christmas Evil is not for all tastes, but it's well worth the time for those looking for a darker, different kind of yuletide film". Tom Huddleston from Time Out Magazine awarded the film a score of 4 out of 5, stating, "In contrast to most slasher flicks, this isn’t about anything as simple as revenge. Jackson’s concerns are bigger: social responsibility, personal morality, and the gaping gulf between society’s stated aims at Christmastime—charity, hope, goodwill to all men—and the plight of those left on the outside: the children, the mentally ill, the ones who don’t fit in. It’s a great-looking film, too: one shot of a suburban street lined with glowing reindeer looks more like Spielbergian sci-fi than low-budget horror. Bizarre, fascinating, thoughtful, and well worth a look". Dread Central gave the film a mixed review, commending actor Maggart's empathetic performance and the film's ending but criticized the film's uninventive direction and flaccid pacing.
It currently has an 80% "Fresh" rating on film review aggregate Rotten Tomatoes, with an average of 6.8/10 based on 5 reviews; audience members, however, rated the film a more negative 31% "Rotten".
In December 2000, Troma Video released the film as a director's cut version, containing material not seen in the theatrical and 1983 reissue prints. This version is in 4:3 full screen, but is presented in unmatted form showing more vertical information than the theatrical widescreen ratio.
In December 2006, Synapse Films released a special edition DVD of Christmas Evil. It features audio commentary from the director and cult filmmaker John Waters, who is quoted as saying it is the "greatest Christmas movie ever made." This version is presented in its matted widescreen ratio of 1.85:1 and is also of the director's cut version.
In December 2014, Vinegar Syndrome released Christmas Evil for the first time ever on Blu-Ray in a combo pack with a DVD version. Both discs use a brand new 4K master of the director's cut in widescreen, and carry over the audio commentary tracks from the previous Troma and Synapse Films releases. Supplements such as trailers and deleted scenes between both discs remain the same, while the footage from the audition tapes are exclusive to the DVD version in the combo pack.