Paul Maddens (Martin Freeman) is a "frustrated, under-achieving primary school teacher" who once had ambitions of being successful as an actor, producer or director. Every year St Bernadette's Catholic school in Coventry, where he teaches, competes with a local Protestant private school (Oakmoor) to see who can produce the best nativity play. Paul hates Christmas because his ex-girlfriend Jennifer Lore (Ashley Jensen), who attended drama school with him, left him at Christmas before he could propose to her. Despite this, the St Bernadette's headteacher Mrs Bevans (Pam Ferris) tasks him with running their nativity play this year, and gives him a new class teaching assistant called Mr Poppy (Marc Wootton), who turns out to be as much of a child as the rest of Paul's class.
As every year, it is one of Paul's other friends from drama school, Gordon Shakespeare (Jason Watkins), who runs the nativity plays at rival school Oakmoor. Determined not to be seen as a failure by his old rival, Paul lies to Shakespeare about how a Hollywood producer—their old friend Jennifer—will be turning his production into a Hollywood film, though he hasn't even spoken to her in five years. Mr Poppy accidentally overhears this and is so excited that he has to spread the rumour. Soon Paul finds his lie is out of control, and all he can do is go along with it as media attention mounts and the children get more and more excited.
Unfortunately, the St Bernadette's children don't seem to be anywhere near as talented as Shakespeare's Oakmoor class, and Paul finds it difficult to have confidence in their abilities. However, enthusiastic and childlike Mr Poppy helps him and the class to create an energetic, interesting nativity which showcases all of the children's unique—and often strange—talents. Meanwhile, Paul tries to find a way to contact Jennifer to make the lie come true, even travelling to America to try to persuade her to visit. However, it turns out that she is only a secretary, not a film producer, and he returns home disappointed.
Finally, amid continuing media attention and the Mayor's kind offer to allow the play to be performed in Coventry Cathedral, Mrs Bevans discovers that the Hollywood story was a lie and cancels the play, advising Paul to start looking for another job. Resigned, Paul shouts at Mr Poppy and blames him for many things that have gone wrong, but comes to his senses when facing his disappointed class and decides that the show must go on.
The play is performed at the cathedral to an audience of the children's parents and family friends, but there is no sign of any Hollywood producers, despite how good the play has turned out to be—and the fact that Mrs Bevans was initially furious to hear that her order had been ignored. Halfway through, jealous Gordon Shakespeare climbs on stage to tell everybody that there is nobody from Hollywood there and the entire story was a lie. Luckily, a helicopter flies over and Mr Poppy declares that it's Hollywood come to see the play; the show continues, and Jennifer and her film producer boss finally come in at the back to watch the end, joined by Paul, who is still in love with Jennifer and kisses her.
The play is a success, and everyone, including Shakespeare, is reunited onstage to celebrate the children's success. As the film closes, Paul and Jennifer are shown decorating his house together for Christmas, reunited at last.Martin Freeman as Paul Maddens, a primary school teacher trying to produce and direct a nativity play that will for once outdo a rival school.Jason Watkins as Gordon Shakespeare, a private primary school teacher and long-time rival of Paul.Ashley Jensen as Jennifer Lore, formerly a Hollywood secretary and Paul's ex-girlfriend.Marc Wootton as Desmond Poppy, an immature classroom assistant.Alan Carr as Patrick Burns, critic.Ricky Tomlinson as The Mayor.Pam Ferris as Mrs Patricia Bevan.Clarke Peters as Mr Parker a Hollywood director, Jennifer's boss during her time at Hollywood.Geoffrey Hutchings as Father Tom.Rosie Cavaliero as Miss Rye.
When released in the UK, the movie opened at number 5 taking £794,314 at the UK box office. In its 3rd week the movie rose to number 4 and in the end made £5,187,402.Nativity 2: Danger in the MangerNativity 3: Dude, Where's My Donkey?
On 17 November 2016 it was announced that the film will be adapted into a stage musical, making its world premiere at the Birmingham Repertory Theatre in October 2017 before touring to Cliffs Pavillion, Southend, Sheffield Lyceum Theatre, Manchester Palace Theatre, Plymouth Theatre Royal, Eventim Apollo, and Leeds Grand Theatre over the Christmas season. It will be written and directed by Debbie Isitt with music by Isitt and Nicky Ager, choreography by Andrew Wright and design by David Woodhead. It will be produced by Jamie Wilson, Entertainment One, Ramin Sabi, Belgrade Theatre, Coventry and Birmingham Repertory Theatre.