In this story, Franklin the Turtle and his little sister, Harriet (introduced in the previous film, Franklin and the Green Knight) are planning to pay a visit to and spend Christmas with their maternal grandparents at Faraway Farm, a farm faraway from Woodland where their mother Mrs. Turtle grew up. As the Turtle Family gets ready to go to the farm, they sing "Deck the Halls" in only the first and third verses. Franklin immediately becomes annoyed with Harriet when she throws a snowball, causing him to drop a large pile of presents. Bear and Beatrice come, and Franklin accidentally forgets his favorite stuffed toy, Sam, at home. Franklin thinks that Harriet dumped Sam in the snow on purpose, when it was really Beatrice who had Sam after they left, and Bear had failed to give it back to Franklin. Franklin is still annoyed with Harriet when they get to Faraway Farm, and he becomes even more annoyed when he learns that he and Harriet will be sleeping in the same room. Later that evening, his maternal grandmother, Grandma Jenny Turtle, tells a strange story from her childhood about a reindeer. This story involves a flashback showing the little Grandma Turtle and Great-Grandpa Turtle. She admits that she might have imagined it as the father takes a family portrait, in which Franklin gives a sad look. Grandma Jenny Turtle then shows Franklin Sirius outside and sings to him Twinkle Twinkle Little Star before sending him to bed.
The next day, as Franklin feeds the chickens, Grandma Jenny Turtle lets him in on a little surprise - she is fixing up an old sleigh for Grandfather Turtle. Franklin decides to help, and Grandma Jenny Turtle introduces him to her neighbors, the Collies, who collect the polish for the sleigh. That night, an ice storm strikes, causing a blackout, and while Franklin is checking the attic closet for candles, he comes across the bell from Grandma Turtle's story, revealing that she was not imagining the story after all.
Franklin shows the bell to Grandma Jenny Turtle the next morning (Christmas Eve), and suggests that they use the bell for Grandfather Turtle's sleigh. Grandma Jenny Turtle has Harriet help with the sleigh, but Harriet spills the beans at lunch (fortunately, Grandfather Turtle does not overhear). Later, while Franklin and Harriet work on the sleigh, Harriet rings the bell, and just like in Grandma Jenny Turtle's story, a reindeer appears. Franklin runs to the house to tell Grandma Jenny Turtle. In the process, Franklin distracts Grandpa, who slips on a puddle of ice and breaks his leg.
Franklin decides to use the sleigh to go and find Dr. Bear in Woodland. He eventually discovers that Harriet has come along, hidden in the back. The horse, Rosie, is just as surprised, and runs away. Franklin is furious, but then sees that Harriet has brought the bell. They ring it, and this time two reindeer come, one with a bell exactly like the one Franklin has. Franklin realizes that the bell must belong to the other reindeer and that this is why he always comes whenever somebody rings it. With the bell back, the original reindeer creates a harness seemingly out of nowhere. As they soar above the clouds Franklin sees Sirius, and together he and Harriet sing "Twinkle, Twinkle, Little Star". Grandma Jenny finds the note Franklin left for her, Grandpa Turtle, Mrs. Turtle, and Mr. Turtle. Mr. and Mrs. Turtle soon return home after spending the afternoon checking on the Collies. Jenny, Mr. and Mrs. Turtle decide to split up and try to find Franklin and Harriet. Franklin and Harriet soon arrive at the Bears' house and fetch Dr. Bear. Rosy returns to the farm and she, Jenny, Mrs. Elizabeth Turtle, and Mr. Jonathan Turtle see Franklin, Harriet, and Dr. Bear arrive by sleigh. Dr. Bear gives Grandfather Turtle a cast for his leg and also gives Franklin his toy Sam.
That night, Franklin and Harriet see Santa Claus and the reindeer out the window. The film ends with Franklin and Harriet saying "Merry Christmas" to each other.