As the Smurfs get ready for the Blue Moon Festival, Papa Smurf sees in his cauldron a vision of Clumsy Smurf reaching for a dragon wand and the Smurfs in cages while Gargamel laughs. Not wanting this vision to come true, Papa Smurf disallows Clumsy to pick Smurf Roots. Clumsy disobeys Papa and ends up unintentionally leading Gargamel and Azrael to the village. The Smurfs all flee for their lives while Clumsy unknowingly runs towards the Forbidden Falls, with Papa Smurf, Smurfette, Grouchy, Brainy Smurf and Gutsy running after him. They find him at the edge of a cliff, and while trying to help him up, they are sucked into a gigantic vortex that spirits them to present day New York City. To make matters worse, Gargamel and Azrael follow them through the vortex. The Smurfs end up in the apartment of Patrick and Grace Winslow, a married and expectant couple, and their Basset Hound Elway. After introducing themselves and explaining their situation, the Winslows befriend them and allow them to stay in their apartment. The next day, needing to find a "star gazer" (a telescope), the Smurfs follow Patrick to his workplace at Anjelou Cosmetics, misunderstanding the previous explanation of his job as fortune-telling. He calls Grace to pick them up.
In preparation for her birthday celebration, the Smurfs read the story of Smurfette, how she was created by Gargamel to destroy them, only for Papa Smurf to rescue her and turn her fully into a Smurf. Meanwhile, she is having nightmares about reverting to her original form and betraying her fellow Smurfs by turning them over to Gargamel. The Smurfs are preparing a surprise party, but as Smurfette tries to find out what her fellow Smurfs are planning, none of them are saying a word. She takes this to mean that everyone has forgotten her birthday.
On Christmas Eve, the Smurfs get ready for their Christmas party. Hefty Smurf and Handy Smurf cut down a Christmas tree, and by Christmas evening, they all finish and start to celebrate. Grouchy Smurf refuses to join the party, expressing his hatred towards Christmas. After their Christmas party, all of the Smurfs go to bed and receive a gift from Papa Smurf - a Smurf hat handcrafted by him. Grouchy wakes up to find a present in front of his door.
As the story begins, Clumsy, Hefty, and Panicky are out in the forest at night with a cart full of smurfberries that has a broken wheel. Unable to fix the wheel, the three of them sit together around a campfire roasting smurfberries when Clumsy has the idea of telling a ghost story to pass the time. Narrator then joins the three Smurfs to tell his own kind of ghost story.