After Toy Santa is created by Curtis' machine, he appears as just a life-sized toy. Shortly, when Scott, Curtis, and Bernard filled him in on what to do as Santa Claus, he became accustomed of his job. Although he has an edge compared to Scott, he seems to be doing okay. However, he finds himself following the handbook too strictly. He is advised by Curtis and Bernard that the naughty-nice list was already checked twice by Scott and that he does not need to worry about it. However, after refusing to listen, he checks it and deems all children are naughty, because of their minor infractions of rules.
Toy Santa creates a toy soldier, enlarges it with the machine, and makes a whole army of them. He becomes a dictator and tells everyone not to make any more toys and to give every child coal. After having Bernard under house arrest, he and his soldiers dump coal on the conveyor belts. Later, after Scott and Curtis enter the North Pole, he has a soldier tie them up with a ribbon and sets out. During the final battle, Scott and Chet pursue him to keep him from leaving. Eventually, after they crash, he is taken by the elves and ended up being "reduced" at the machine.
In the closing credits, Toy Santa ends up being small and is teaching other small Santas how to dance.