The New York City based Macy's declined any involvement with the film, so the fictitious "Cole's" was used as its replacement. Gimbels had gone out of business in 1987, so it was replaced by the fictional "Shopper's Express".
The film opens with an elderly man (Richard Attenborough) sporting a Homburg, glasses, and a brown coat with a cane, walking on the street as his morning routine. As he stops at a crosswalk, a young boy named Ryan pleads to his grandfather, Judge Henry Harper, to "ask him". Henry, knowing that the man overheard Ryan, clears up the misunderstanding by saying that Ryan thinks he is Santa Claus. After an exchange of laughs, the elderly man surprises Ryan by saying, "I am". After he leaves, a dismayed and contented Ryan states that he "should have got his autograph".
On the same day, Cole's Department Store's special events director Dorey Walker (Elizabeth Perkins) fires Tony Falacchi from being the store's Santa after he gets drunk before taking part in the Thanksgiving parade. Immediately trying to find a replacement, she spots the elderly man from the film's opening who was berating the inebriated Tony before the parade. When Dorey begs him to take over, he introduces himself as Kris Kringle. He does so well in the parade that he is immediately hired to be the store's Santa for the holiday period.
All the children begin to believe that he is the real Santa, with the exception of Dorey's six-year-old daughter, Susan (Mara Wilson). Dorey's boyfriend and neighbor, Bryan Bedford (Dylan McDermott), does his best to convince Susan to believe. While being babysat one night by Kris, she shares her Christmas wish with him. She would like a dad, a house (used every year for the Cole's catalog photoshoot) and a baby brother. He asks if she would begin to believe in Santa if she got all those things. She agrees that she would.
Kris is credited with bringing in increasingly more sales to Cole's than previous years. One night, while walking home, a man tries to interrogate him, which angers and leads him to assault the former. These actions, however, lead him to be arrested. The man whom he assaulted is revealed to be Tony, who had apparently taken revenge by means of setting him up to be arrested with the help of staff and the administration of Shopper's Express, Cole's rival department store corporation.
With the help of Bryan, Dorey takes Kris' case to court, and drums up support for him from the public. In the courtroom where Judge Henry Harper presides, Bryan manages to bring witnesses to testify that Kris is Santa after meeting him at Cole's, but the prosecution presents a compelling case that Santa doesn't exist, leading Henry to confide in Bryan that he would be forced to rule against Kris.
Just as Henry is about to make his decision, Susan walks up to him with a Christmas card containing a $1 bill. On the back, the words In God We Trust are circled. He realizes that, since the U.S. Department of Treasury can put its official faith in God with no hard evidence, then the people can believe in Santa in the same way. Left with no choice, an elated Henry dismisses the case and declares that Santa is real, existing in the person of Kris.
Following the court case, Dorey and Bryan are maneuvered by Kris into realizing their true feelings for each other, and married in a very small ceremony right after the Christmas Eve Midnight Mass. On Christmas morning, Susan wakes to the news of the marriage and is elated to see that she has part one of her Christmas wish, Bryan as her new stepdad. Together, Susan, Dorey and Bryan drive out to the catalog house and upon arrival, find that Kris has arranged for them to purchase it, which they can now afford due to the size of the Christmas bonus Dorey has received as a result of Kris' work at Cole's. Susan, now having got two out of three of her wishes, excitedly runs in the house to look at her bedroom. Dorey and Bryan are about to kiss when Dorey asks her what the last part of her Christmas wish was, and she triumphantly announces that it was a baby brother. Dorey and Bryan both look at each other, shocked, before glancing down at Dorey's stomach and sharing a kiss. The film ends with the belief that Susan has now received all she asked for in her wish. It is then mentioned that Kris has gone overseas.Richard Attenborough as Kris Kringle, said to be the real Santa Claus. He reluctantly takes on the duty as Cole's Santa after Tony Falacchi, the original drunk Santa, is terminated.
Elizabeth Perkins as Dorey Walker, the director of special events for Cole's, Susan's mother, and Bryan Bedford's girlfriend and neighbor.
Dylan McDermott as Bryan Bedford, Dorey's boyfriend and neighbor.
Mara Wilson as Susan Walker, Dorey's 6-year-old daughter.
J. T. Walsh as Ed Collins, a lawyer
Simon Jones as Donald Shellhammer, the general manager of Coles, known for his departing phrase "Chin-Chin".
Joss Ackland as Victor Landberg, owner of Shopper's Express who is eager to see Cole's go out of business so he can buy it out and extend his market.
Jack McGee as Tony Falacchi, the drunk man who was fired from being the Cole's Santa.
James Remar as Jack Duff, an associate of Victor Landberg.
Jane Leeves as Alberta Leonard, another of Victor Landberg's associates.
William Windom as C.F. Cole, the chairman and owner of the Cole's corporation.
Robert Prosky as Judge Henry Harper, the city judge presiding over Kris' case. He has a grandson named Ryan who is seen thinking Kris is Santa in the first scene of the film.
Allison Janney as a brazen shopper at Cole's.
At the box office, the film opened at #8 with $2,753,208 and eventually finished with $17,320,146 in North America and $46,264,384 worldwide.
The film received mixed to positive reviews, with Rotten Tomatoes giving it a score of 61% based on reviews from 23 critics. TV Guide called the film "curiously depressing", while Desson Howe of The Washington Post claimed that, in contrast to the 1947 version, "[it] will not be found on television (or its computer equivalent) half a century from now." Its supporters include Gene Siskel & Roger Ebert, who gave it "two thumbs up" on their show (the quote is also on the front of its home video release). Michael Medved of Sneak Previews said "This is the new holiday classic America has been waiting for."