In 1850 in Germany Clara's family are celebrating on Christmas Eve. Clara is jealous because her older sister, Louise, has a boyfriend, leaving her feeling sad and wondering about growing up. She immediately cheers up when the eccentric Uncle Drosselmeier arrives at their home with special gifts: a fully automated toy castle for everyone, and a Nutcracker for Clara.
Upon giving her the Nutcracker, Clara's little brother, Fritz, breaks it. To cheer Clara up, Drosselmeier tells her a story about how the Nutcracker came to be the Prince of the Dolls.
Once upon a time there were a King and a Queen who had a beautiful, but vain and normal daughter named Pirlipat. To celebrate the King's birthday, the Queen made a special cake out of blue cheese, the King's favorite. However, the scent of the cheese drew out all the mice, who ate and destroyed the cake. The King was enraged and commanded his inventor, Elias Christian Drosselmeier, to capture all the mice. Drosselmeier and his nephew, Hans, were successful in capturing all the mice, except the Mouse Queen and her only son.
In revenge, the Mouse Queen casts a spell on Pirlipat, causing her to become unusually ugly and weird. Drosselmeier was once again given the task of figuring out how to cure her. He eventually learned that the fabled Krakatooth Nut can cure her, on the condition that it is cracked open in the teeth of a young man who has never worn boots. The King commanded all the princes and noblemen to apply, with the promise of marrying Pirlipat once she is cured.
However, the Krakatooth is so hard that all the men's teeth shatter upon trying to crack it. Drosselmeier is about to be beheaded for being unable to cure Pirlipat when Hans steps in. He manages to crack the nut open between his teeth and gives it to Pirlipat, breaking the spell. Then the angered Mouse Queen casts a spell on Hans, turning him into the Prince of the Dolls (in other words, a Nutcracker). During the ruckus, she is killed by a falling statue, and her son's tail is caught and bent. He survives and declares himself the Mouse King.
Drosselmeier is exiled from the kingdom for trying to pass a "Nutcracker as a son-in-law", while the King and Queen celebrate with their now-cured daughter. As Drosselmeier holds the Nutcracker that Hans has become, the Mouse King vows revenge upon Hans for ruining his tail ("And if you think your beloved nephew Hans is ugly now, ha! Wait 'till I turn him into a pile of splinters!").
Clara is upset by the story for its unhappy ending, but is consoled when Drosselmeier tells her that the spell can be broken if he defeats the Mouse King and wins the hand of a fair maiden. While playing with his toy soldiers, Clara's brother Fritz breaks the Nutcracker. Clara is heartbroken, but Drosselmeier promises to fix it for her. That night, when everyone has gone to sleep, Clara ventures into the sitting room to dance with her Nutcracker and introduces him to her dolls, Trudy, Marie and Pantaloon, an old general in Fritz's toy soldier army.
Suddenly the Mouse King and his army of mice arrive, intent on getting his revenge on the Nutcracker for his injured tail, as well as his mother's death. Drosselmeier appears on the grandfather clock and brings the Nutcracker and all the dolls and soldiers in the room to life. The Nutcracker, who has no memories following being transformed, battles the Mouse King, while the soldiers fight the mice. Clara saves the Nutcracker from the Mouse King by throwing her slipper at him.
The first battle comes to a halt, though, when she slips on a cannonball and crashes into the clock, losing consciousness for the rest of the night. The next morning, she awakens in her own bed and tries to tell her mother about the battle, only to be told to rest. Drosselmeier visits with the repaired but now lifeless Nutcracker, giving only vague answers to Clara's questions about the previous night.
The next night, the Mouse King returns, angry about what Clara has done. Before he can go after the Nutcracker once more, Clara tricks him, briefly trapping him in her drawer, in her bedside table in her room. However, when she retrieves the unawakened toy, the Mouse King has escaped and threatens to harm her kitten, Pavlova, if she doesn't hand the Nutcracker over. Suddenly, Drosselmeier reappears, and the toys awaken once more.
The Nutcracker tells Clara not to worry, but then is cut by the mouse king. This leads into a fearsome fight under the Christmas tree. The Mouse King is supposedly defeated when he is stabbed in the chest and falls off the tree to his death. The leaderless army of mice run away amid the cheering toys. When everyone see that Pantaloon has been injured in the fight, they have to return to the Land of the Dolls to revive him.
Clara is then shrunken down to doll size thanks to Drosselmeier's magic, and they enter the Land of the Dolls through the toy castle. As they leave, Pavlova goes to inspect the Mouse King's body, but is frightened away when the Mouse King suddenly opens his eyes.
The Nutcracker, Clara, Pantaloon, Trudy and Marie arrive at the Land of Dolls on flying swans, passing forests of Christmas trees and arriving at a palace made of sweets. Once they are there, Pantaloon is cured. The Nutcracker is given a royal welcome as the Prince of the Dolls amid many cheering toys. Clara shares a romantic dance with the Nutcracker, who takes her by the hand and gets down on one knee. He then asks her to stay with him and be his princess.
Clara is ready to embrace her childhood fantasies and her beloved companion, but sadly refuses; she wishes she could, but the adventures of growing up and her family are still waiting for her. The dolls start to turn back into inanimate toys, and a dying Mouse King suddenly arrives for one last chance at revenge. The Nutcracker tries to save her, but slowly turns back into a toy himself. Clara tries to keep the Mouse King at bay, but he corners her on a balcony.
As he strikes, he falls off the castle to his death in the river below, almost taking Clara with him. Clara pulls herself back up and finds the castle is completely abandoned. She tearfully cries out for her Nutcracker as mist fills the lonely palace.
Clara wakes up to find herself back home. There is no sign of the events that she has experienced except her brother's statement that Pavlova discovered a large dead mouse near the toy castle. Clara rushes downstairs to find the Nutcracker missing. She runs to Uncle Drosselmeier's workshop where he seems to be expecting her. She begs him to tell her whether the fairytale he told her was true or false.
Clara is suddenly silenced when a young boy enters the room, carrying a big clock. Drosselmeier introduces the boy as his nephew Hans, whom Clara recognizes as her beloved Nutcracker in his human form. The film ends with Hans and Clara addressing each other. "Hello, Clara," Hans says, and then she replies, "Hello, Nutcracker".Kiefer Sutherland - Hans/The Nutcracker
Megan Follows - Clara
Mike MacDonald - The Mouse King
Peter O'Toole - Pantaloon
Phyllis Diller - The Mouse Queen
Peter Boretski - "Uncle Drosselmeier" (He is Louise, Clara, and Fritz's godfather, and Hans's actual uncle)
Lynne Gorman - Trudy
George Merner - Dr. Stahlbaum
Stephanie Morgenstern - Louise
Christopher Owens - Erik
Diane Stapley - Mrs. Ingrid Stahlbaum
Mona Waserman - Princess Perlipat
Noam Zylberman - Fritz
Len Carlson - King, Mouse, Court Attendant, Band Member #2, Spectator / Soldier
Marvin Goldhar - Mr. Schaeffer, Mouse, Guest #3, First Guard, Soldier, Band Member #1, Contestant, Spectator
Keith Hampshire - Mouse, Guest, Second Guard, Contestant, Spectator, Soldier
Elizabeth Hanna - Marie, Mrs. Schaeffer, Doll, Guest #4, Spectator
Susan Roman - Mouse, Mrs. Miller, Guest #1, Doll, Spectator
Theresa Sears - Queen, Mouse, Guest #2, Doll, Spectator
The film has been released on DVD several times. It was initially released by Hollywood DVD on October 14, 2001 in the United Kingdom. A Region 1 DVD was released in Canada and the USA by GoodTimes Entertainment on November 9, 2004. This DVD was sourced from the canadian print, as a result, this caused the Warner Bros. Pictures and Warner Bros. Presents notice that was used on the American Theatrical and VHS release to be deleted. On April 2, 2007, it was released in on DVD for the second time in the United Kingdom by Boulevard Entertainment. Both releases have no extras besides animated menus and a theatrical trailer.