Kris Kringle (Edmund Gwenn) is indignant to find that the man (Percy Helton) assigned to play Santa in the annual Macy's Thanksgiving Day Parade is intoxicated. When he complains to event director Doris Walker (Maureen O'Hara), she persuades Kris to take his place. He does so well he is hired to play Santa at Macy's flagship New York City store on 34th Street.
Ignoring instructions from toy department head Julian Shellhammer (Philip Tonge) to recommend overstocked items to undecided shoppers, Kris directs one woman (Thelma Ritter) to another store to fulfill her son's Christmas request. Initially confused, but nevertheless impressed by Kris's honesty and helpfulness, she informs Julian that she will become a loyal Macy's customer.
Attorney Fred Gailey (John Payne), Doris's neighbor, takes the young divorcée's daughter Susan (Natalie Wood) to see Santa. Doris has raised her to not believe in fairy tales, but Susan is shaken after seeing Kris speak Dutch with a girl (Marlene Lyden) who does not know English. Doris asks Kringle to tell Susan that he is not Santa, but he insists that he is.
Worried, Doris decides to fire him. However, Kris has generated so much positive publicity and goodwill for Macy's that R. H. Macy (Harry Antrim) promises Doris and Julian bonuses. To alleviate Doris's misgivings, Julian has Granville Sawyer (Porter Hall) administer a "psychological evaluation". Kris passes easily, but Sawyer still recommends his dismissal.
The store expands on the concept of steering customers to competitors if necessary. To avoid looking greedy, Gimbels implements and further expands the same policy, forcing Macy's and others to reciprocate. As a consequence, Kris does the impossible, reconciling bitter rivals Macy and Gimbel (Herbert Heyes).
Pierce (James Seay), the doctor at Kris's nursing home, assures Doris that Kris is harmless. To alleviate Doris's worries, Pierce suggests Kris stay with someone. Fred volunteers. Later, Kris makes a pact with Fred: he will work on Susan's cynicism while Fred does the same with Doris's. When Susan reveals to Kris she wants a house for Christmas, showing him a photo of her dream house torn from a magazine, he reluctantly promises to do his best.
In the company cafeteria, young employee Alfred (Alvin Greenman) tells Kris that Sawyer convinced him that he is unstable simply because he is kind-hearted. Kris immediately goes to Sawyer's office to confront him, eventually striking him on his head with an umbrella. Sawyer exaggerates his pain to have Kris confined to Bellevue Hospital. Tricked into cooperating, and believing Doris to be in on the deception, Kris deliberately fails his examination and is recommended for permanent commitment. However, Fred persuades Kris not to give up.
At a hearing before Judge Henry X. Harper (Gene Lockhart), District Attorney Thomas Mara (Jerome Cowan) gets Kris to assert that he is Santa Claus and rests his case. Fred argues that Kris actually is Santa. Mara requests Harper rule that Santa does not exist. In private, Harper's political adviser, Charlie Halloran (William Frawley), warns him that doing so would be disastrous for his upcoming reelection bid. Harper buys time by hearing evidence.
Doris quarrels with Fred when he quits his law firm to defend Kris. Fred calls Macy as a witness. When Mara asks if he believes Kris to be Santa, Macy starts to equivocate, but when pressed, he responds, "I do." On leaving the stand, Macy fires Sawyer. Fred then calls Mara's own young son (Bobby Hyatt), who testifies that his father told him that Santa was real. Mara concedes the point.
After his son and wife leave the courtroom, Mara then demands that Fred prove that Kris is "the one and only" Santa Claus on the basis of some competent authority. While Fred searches frantically, Susan writes Kris a letter to cheer him up, which Doris also signs. When a New York Post Office mail sorter (Jack Albertson) sees Susan's letter, which is addressed to Kris at the New York courthouse, he suggests delivering all of the letters addressed to Santa Claus, in the dead letter office, to Kris.
When court resumes, Fred still has not found some competent authority to back Kris's claim, but then an official informs Fred of the arrival of the mailbags at the courthouse. Fred presents Harper with three of the letters, addressed simply to "Santa Claus" that were just now delivered to Kris, asserting that the Post Office—a branch of the U.S. federal government—has acknowledged that Kris is the one and only Santa Claus. Mara objects, on the grounds that three letters alone do not constitute sufficient proof, and Fred tells Harper that he hesitates to produce many more such letters that he says that he has. When Harper insists, Fred has all of the letters addressed to "Santa Claus", in all of the mailbags, dumped onto Harper's desk. Unpiling himself from the deluge of letters, Harper (with great relief) dismisses the case.
On Christmas morning at a celebration at Dr. Pierce's clinic, Susan loses faith in Kris when he does not give her the house she wanted. Kris offers Fred and Doris a route home that avoids traffic. Along the way, Susan sees the very image of her dream house with a "For Sale" sign in front. Susan demands that Fred stop the car, whereupon she joyfully runs into the house, exclaiming "Mr. Kringle IS Santa Claus!" Fred learns that Doris had encouraged Susan to have faith and suggests they purchase the house—a proposition with which Doris joyfully agrees. He then boasts that he must be a great lawyer since he proved an eccentric old man was Santa. However, when he and Doris spot a cane in the house that looks just like Kris's, he is not so sure that he worked this miracle alone.
Maureen O'Hara as Doris Walker
John Payne as Fred Gailey
Edmund Gwenn as Kris Kringle
Gene Lockhart as the Hon. Henry X. Harper
Natalie Wood as Susan Walker
Porter Hall as Granville Sawyer
William Frawley as Charlie Halloran
Jerome Cowan as District Attorney Thomas Mara
Philip Tonge as Julian Shellhammer
Uncredited (alphabetically):
Jack Albertson as "Al", the Post Office Mail Sorter
Harry Antrim as R. H. Macy
Lela Bliss as Mrs. Shellhammer
Jeff Corey as Reporter
Mary Field as Dutch Girl's Adopted Mother
William Forrest as Dr. Rogers at Bellevue
Alvin Greenman as Alfred
Theresa Harris as Cleo, the Walkers' maid/housekeeper
Percy Helton as Drunken Santa Claus
Herbert Heyes as Mr. Gimbel
Robert Karnes as 2nd Bellevue Intern
Snub Pollard as Mail-Bearing Court Officer
Thelma Ritter as Peter's Mother
James Seay as Dr. Pierce, physician at the Brooks Memorial Home for the Aged