Chicago-area resident Clark Griswold intends to have a great Christmas with his entire family. He drives his wife Ellen and children Audrey and Rusty out to the country to find a tree, ultimately choosing the largest one they can find. Realizing too late that they did not bring any tools to cut down the tree, they are forced to uproot it instead. Clark's holiday plans inadvertently cause steadily escalating chaos for the family's yuppie neighbors, Todd and Margo Chester.
When both Clark's and Ellen's parents arrive for Christmas, their bickering quickly begins to annoy the family. However, Clark maintains a positive attitude and remains undeterred in his plans. He covers the house's entire exterior with thousands of lights, which temporarily cause a citywide power shortage once he gets them to work properly.
Ellen's cousin Catherine and her redneck husband Eddie arrive unannounced with two of their younger children, Rocky and Ruby Sue, and their pet Rottweiler, Snots. Eddie later admits they are living in the RV in which they arrived, as he went broke and had to sell their home and land. Clark offers to buy gifts for Eddie's kids so they can still enjoy Christmas. Soon afterward, Clark's senile Aunt Bethany and cantankerous Uncle Lewis arrive.
Clark begins to wonder why his boss, Frank Shirley, has not given him his yearly bonus, which he desperately needs to pay for a new swimming pool. After a disastrous Christmas Eve dinner, during which Aunt Bethany's cat is electrocuted and Uncle Lewis accidentally burns down the Christmas tree while lighting his cigar, a courier delivers an envelope. Instead of the bonus Clark expects, it is a membership in a jelly club. He snaps and angrily wishes for Frank to be delivered to the house so he can insult him to his face.
Taking Clark's request literally, Eddie kidnaps Frank, who admits to canceling the Christmas bonuses but then reinstates them in the face of Clark's chastisement. Meanwhile, Frank's wife Helen calls the police, and a SWAT team storms the Griswold house and holds everyone at gunpoint. Frank decides not to press charges and explains the situation to his wife and the SWAT leader, both of whom scold him for canceling the bonuses until he reveals his change of heart.
The family goes outside when Rocky and Ruby Sue believe they see Santa Claus in the distance. Clark tells them it is actually the Christmas Star and that he finally realizes what the holiday means to him.
Uncle Lewis says that the light is coming from a sewage treatment plant, reminding Clark that Eddie had been dumping his RV sewage into the nearby storm drain. Before Clark can stop him, Uncle Lewis lights another cigar and tosses the match into the drain, causing a giant gas explosion which sets a Santa's sleigh decoration afire and launches it into the sky. Aunt Bethany starts singing "The Star-Spangled Banner" and everyone joins in as the flaming decoration flies into the distance.
The entire family, along with the Shirleys and the SWAT team, go inside to celebrate while Clark and Ellen share a Christmas kiss. Clark is satisfied that he has provided a great Christmas for his family.
Chevy Chase as Clark W. "Sparky" Griswold Jr.
Beverly D'Angelo as Ellen Griswold
Juliette Lewis as Audrey Griswold. Audrey was previously portrayed by Dana Barron and Dana Hill in the last two films and later by Marisol Nichols in Vegas Vacation
Johnny Galecki as Russell "Rusty" Griswold. Russ was portrayed by Anthony Michael Hall and Jason Lively in the previous two films and later by Ethan Embry in Vegas Vacation. Notably, this is the only film in which Rusty and Audrey are the same age, hence Lewis being taller than Galecki.
John Randolph as Clark Griswold Sr., Clark's father
Diane Ladd as Nora Griswold, Clark's mother
E. G. Marshall as Arthur "Art" Smith, Ellen's father
Doris Roberts as Frances Smith, Ellen's mother
Miriam Flynn as Catherine Johnson, Ellen's cousin
Randy Quaid as Eddie Johnson, Catherine's husband
Cody Burger as Rocky Johnson
Ellen Hamilton Latzen as Ruby Sue Johnson
William Hickey as Uncle Lewis
Mae Questel as Aunt Bethany
Sam McMurray as Bill, Clark's co-worker
Julia Louis-Dreyfus as Margo Chester, the Griswolds' yuppie neighbor
Nicholas Guest as Todd Chester, Margo's husband
Brian Doyle-Murray as Frank Shirley, Clark's boss
Natalia Nogulich as Helen Shirley, Frank's wife
Nicolette Scorsese as Mary, a lingerie counter clerk
Alexander Folk as Lead SWAT Officer
Jeremy Roberts as cop
Woody Weaver as cop
Doug Llewelyn as the voice of the Parade Announcer
Keith MacKechnie as delivery boy
Rick Stevens as Ralph, Ellen's awkward cousin