After no one in Dimmsdale gets the gifts that they want for Christmas, Timmy wishes that Cosmo, Wanda and Poof could give everyone a wish-granting coupon in the mail. Things go wrong when Vicky wishes for a million wishes causing her mailbox to explode, and everyone catches the falling wishes, thus causing the Big Wand to overload. Jorgen von Strangle has to shut off the fairiesmagic power. Soon, Christmas is replaced with "Wishmas" and an unemployed Santa Claus moves in with the Turners. Timmy must devise a way to end Wishmas and get Santa back to the North Pole.
It's the day after Christmas, and Cosmo is reading to his son a book called 'The Day After Christmas'. As he reads, Timmy is searching among his several Christmas gifts trying to find the sled he wanted. Timmy is upset as he realizes he didn't get one. He's not the only one as his parents complain about not getting what they wanted. Everyone else is complaining about them not getting what they wanted on their Christmas list. Mr. Turner, who didn't ask for a sled, got one and burned it instead of giving it to Timmy. Timmy's parents then force him to remove the snow from their entrance with the shovel he's got. Wanda advises Timmy to think about what he has instead of what he doesn't have. Cosmo then mentions that he uses magic to get the things he doesn't have, thus inspiring Timmy to wish for his sled. He then goes to a place where he and his friends, who also wanted sleds for Christmas, planned to meet and use them. However, it turns out they didn't get sleds. A.J. got a printer, Chester got a trash can and Elmer got a tuba. Inspired by funny comments made by Cosmo and Wanda, Timmy has them dressed as mailmen and deliver "wish coupons" to everyone. Tootie wishes for a flying seahorse, Sanjay wishes his elephant had a friend named Jimmy, Timmy's Dad wishes he's Nog-Man, A.J. wishes for a super computer he finds a little creepy and Chester wishes for a giant flying pizza. While Cosmo resumes reading his book to Poof and wondering who the murderer is, Timmy believes nothing could go wrong with Wishmas.
That is, until Vicky complains about getting only 1 wish. She then decides to wish for 1 million wishes, causing millions of coupons to flow from her overloaded and exploding the mailbox. People then use them to make several wishes, including Sanjay wishing his elephant's friend had 40 friends named Bimmy and Nogman wishing for a sidekick. All these wishes cause the big wand to suffer an overload, leading Jorgen to deactivate it. Despite being initially angry, Jorgen enjoys the idea of Christmas being replaced with Wishmas as Santa always took credit for the fairy's work. To make matters worse, the world's reaction to Wishmas cause Santa to give up on Christmas and move in with the Turners. As a cover story, Timmy claims he won a contest on the radio where the prize was having Santa Claus living with him. In order to get Santa back to the North Pole, Timmy uses several means to make Old Nick's stay uncomfortable. None of them working. Desiring to be the new symbol of Wishmas, Jorgen writes a letter wishing for it and then names Cosmo and Wanda his sidekicks. When it comes to the new holiday season, Timmy turns on the news hoping to show Santa people waiting for Christmas but instead finds people waiting for Wishmas.
Claiming that kids don't look at the news, Timmy tries to find a Christmas special but instead find a Wishmas special that parodies the Grinch Stealing Wishmas. When it comes that day Jorgen picks Cosmo and Wanda to help him, Timmy traps his Fairy Godparents within a butterfly net and pulls a trapdoor under Jorgen. When the kids are sad upon not having any gifts, Cosmo and Wanda beg their godchild to release them since they can't stand to see sad kids but Timmy keeps them trapped long enough to make Santa willing to restore Christmas. Because Santa and his elves didn't make any toys that year, it seems there's no hope until the kids decide to give the toys they've got for last Wishmas. Santa then uses Nogmobile as his sleigh (he had sold his previous one to buy food). Jorgen then shows up but Santa's magic is more powerful than his. As Cosmo reads the end of his book, Timmy realizes Santa wrote it and that he knew it all would happen. As the Nogmobile departs, Timmy asks how Santa knew he'd learn his lesson and Santa explains to Timmy he's Santa.
A second Holiday Special of the series was ordered by Nickelodeon because the Latin American version of the channel, didn't have a Christmas special of the show to broadcast, since the first seasons of The Fairly OddParents had been sold to Disney in that region.