On a snowy winter night on Christmas Eve, in the Alpha Kappa Gamma sorority house, Lauren is getting changed into her pajamas. In the next room Clair (Leela Savasta) is writing a Christmas card to her half-sister, Leigh. Suddenly she hears something from her closet. She goes over to the closet door and looks inside. Nothing but clothes. She goes back to the card, when someone comes from behind and pulls a black plastic bag over her head. As she is about to scream a pair of scissors are stabbed into her right eye.
At a mental institution not far away Billy is being served his Christmas dinner. He is locked away, rocking back and fourth in his rocking chair, safely in his cell that is decorated with Christmas lights. The orderly serving the food gets a scare from a volunteer dressed as Santa who is looking for the children's ward. A security guard makes jokes to the orderly about Billy trying to escape every year. The orderly and Santa walk away, leaving the security guard alone in the hall. Billy opens the small window on his cell and places a present wrapped in newspaper on the ledge for the security guard. The security guard opens it to find nothing that interesting, except on the newspaper is written "I'll be hope for Christmas." The security guard looks into the cell to find it empty and Billy's chair rocking back and fourth. He quickly opens the cell and goes inside, to find a hole in the wall. He takes his flashlight and looks into the hole, as Billy comes from under the bed and stabs him in the back with a candy cane. Billy leaves the cell and kills the man dressed as Santa. He steals his outfit, stuffs his body in a bad, and leaves the institution, dumping the bag in the dumpster with the man's hand sticking out from the bag.
Outside of the sorority house Kelli (Katie Cassidy) and her boyfriend Kyle (Oliver Hudson) are talking in his car. She tells him that she is going to spend Christmas with her roommates but that she will make it up to him. He is disappointed because this is their first Christmas together. She kisses him goodbye and goes inside the house. As she does her fellow sorority sister Megan (Jessica Harmon) calls Kyle on his cell phone. We do not hear what is said, but Megan is not happy with Kyle. Megan is in her room, watching an old home made porn movie that features her and Kyle. Kyle hands up the phone.
Kelli goes inside and greets everyone. We are introduced to Melissa (Michelle Trachtenberg), the sarcastic yet loyal best friend. Heather (Mary Elizabeth Winstead), the southerner with a rich family. Dana (Lacey Chabert), the self-obsessed girl who is painting her nails and wishing they would hurry up and open presents. Lauren (Crystal Lowe), the drunk who explains Christmas is really just a Pagan holiday and that Christians are pretty much stupid and pathetic to believe in such crap. Last but not least is Ms. Mac (Andrea Martin), the house mother who loves all of the girls and accepts their flaws.
They have a "secret santa" gift giving thing going and Ms. Mac wants to know who got Billy. According to her, Billy killed his family here. We flashback to Billy being born and learn that he has a skin disorder that makes him yellow. His father loves him regardless but his mother is disappointed and wants nothing to do with him. They live in the house that is now the sorority house. As Billy gets a bit older he is treated even worse by his mother, who has become an alcoholic. On Christmas his mother tells him Santa was shot down by the Russians. His father, however, tells him he has a present for him hidden in a stow-away space in Billy's closet. Billy goes into his room (which was Clair's room in present day!) and finds a telescope. He is so very happy. A few years later his Mom and Dad are not getting along very well, and his Mom is having an affair. Billy hears them arguing and looks under their door to witness his father with a bag over his head and his head being bashed in with a hammer. Billy runs back to his room as his mother and her lover take the body outside and begin to bury it in the crawl space under the house. Billy is watching this and is discovered. His mother chases him into the attic and locks him in there.
All of the girls are horrified by this story but Ms. Mac assures them it is all true. Heather says she was the one who drew Billy's name for secret Santa but she thought it was wrong to buy him a gift because he was a murderer and it was offensive to the birth of Jesus to make a mockery of gift giving. Heather starts to go upstairs to her room but runs into Eve (Kathleen Kole). Eve has been upstairs the whole time and is leaving to go visit her family. She gives Heather her secret santa gift, a crystal statue of a unicorn. Heather is less the impressed and bids Eve farewell. Eve goes towards the door but Ms. Mac tells her she has a present for her. Before she can find it Eve leaves, obviously disappointed by Heather's reaction.
Kelli and Lauren go upstairs to tell Clair and Megan they are going to open the presents. Clair obviously doesn't answer. Lauren pounds on the door and says she is going to steal her presents if she doesn't get down here. Laughing, Kelli does this on Megan's door. Megan tells them to go away and she doesn't want to open presents. They leave and Megan hears a snow globe tune playing in the attic. She goes into the attic and asks if someone is playing a joke. She gets more then she bargained for when she finds Claire's body by the window in a rocking chair. Someone comes from behind and smashes the snow globe into her head. She falls onto the ground as a bag is put over her head. She fights back, but the figure rips out on of her eyes with their bare hand!
The phone rings. Melissa answers it and puts it on speaker phone. The caller is making all sorts of weird noises and talking about Agnes, Billy and a baby. Lauren makes fun of the caller and tells him/her that good little boys and girls are waiting for him to make a delivery. The caller says "I'm going to kill you" to Lauren before hanging up. Heather says someone is obviously sick in the head and doesn't need to be provoked by Lauren. Melissa checks the caller ID and is surprised to see it's coming from Megan's cell. They assure themselves it's just a joke.
They open their presents, with Ms. Mac getting some lingerie as a gag gift. Everyone laughs and Kelli goes back upstairs to check on the girls. Kyle suddenly pops out of Megan's room. Kelli screams and the other girls rush upstairs. Kyle apologizes and says he wanted to surprise her. Ms. Mac asks if Megan is in her room and Kyle says he doesn't know. Lauren asks him how he could have just been in her room and not know if she is in there. He explains that it's really dark in there. He makes a joke about Billy getting her. He then tells everyone another story about Billy's past.
Billy was kept in the attic for many years. His Mother and Stepfather lived happily without him. Everything was wonderful except his mom couldn't get pregnant...so she crept into the attic and had sex with Billy. Nine months later she gave birth to an (ugly!) baby girl named Agnes. As Agnes grew older Billy became jealous. One Christmas Agnes got a doll. Billy snapped and broke out of the attic: attacking Agnes and pulling out one of her eyes, stabbing his stepfather in the face and beating his Mom to death with a dough roller. When the police arrive on the scene they find him eating cookie made from his Mother's flesh. We learn that Agnes was put into a mental institution and no one knows where she is today.
The girls are freaked out by the story. Kelli goes inside Megan's room and finds the porn video on the computer. She breaks down and Kyle tells her it was from a long time ago. Kelli screams for him to leave the house and he becomes enraged, calling the women "spoiled bitches." Ms. Mac goes off on him about treating Kelli like that, pushing him towards the stairs.
He leaves, as a figure is standing by the tree looking at the presents. Ms. Mac asks who the person is as we are finally introduced to Leigh (Kristen Cloke), Clair's half-sister. She tells the girls that Claire never called her telling her she was ready to be picked up and she is worried. Dana says she had no idea Clair had a sister. Leigh explains they are only half sisters and trying to get to know each other.
Suddenly the power goes out in the house. Dana says the circuit breaker is under the house and she will go turn it on. She goes outside and smokes, dropping her cigarette into a hole on the porch. She hears someone underneath it. Taking her flashlight she opens the door to the crawl space and looks inside. Suddenly someone grabs her, pulling her in. The two struggle as the figure grabs a gardening tool and stabs Dana in the head.
Lauren is beyond drunk now, having been chugging booze the whole night. Melissa tells her she stinks and needs to shower. As she showers, someone watches from a broken tile in the floor. After the shower Lauren goes to bed.
Everyone is wondering where the hell everyone is. Kelli questions what is taking Dana so long, and is even more startled when someone calls from Dana's cell number and hangs up. Kelli and Leigh go outside to look for her. They find Eve's car still parked outside. They open the car door and scream as Eve's severed head rolls out. The two women rush back inside, locking the door behind them. Kelli calls the police but because of the snow it may take over two hours for them to arrive. Ms. Mac tells everyone that they can pile into her car and try to find help. Kelli says that they won't get far and that they need to stick together. Heather says she wants to leave, and Ms. Mac tells the girls that they can stay and she will go with Heather to find help. The two go outside and get in the car. Ms. Mac gets out of the car to scrape the ice off of the windshield. As she begins to scrape Billy's yellow eye comes into view inside the car. Ms. Mac gasps as he kills Heather, her blood spraying all over the windshield. Ms. Mac falls against a fence, causing an icicle to fall from above and go right into her skull.
Leigh notices that Ms. Mac hasn't left yet. She decides to go see what's going on. Kelli decides to go out with her, leaving Melissa and a sleeping Lauren behind. As they leave the house a figure grabs Heather's unicorn statue and walks down the hall. Outside, Leigh slips in a pool of blood and screams. Upon hearing this Melissa rushes towards the stairs. A figure grabs wraps a bag over her head, slamming her into a wall. She rips the bag off and rushes through the house and into her room. She grabs a stick and hits the figure with it. Melissa opens a window and is going to climb out but the figure throws an ice-skate at her, cutting off the back of her head.
Kelli and Leigh rush inside and call for Melissa. There is no answer and they go to Lauren's room, closing the door behind them. But someone is on the other side of the door and kicks it open. It's Kyle! Leigh attacks him and he throws her against Lauren's bed, causing the covers fall off of Lauren, who is very much dead with her eyes gouged out! Everyone screams and Kyle insists he isn't the killer! Kelli calls Lauren's cell phone and hears it ringing in the attic. She explains that the killer might be in the attic with her phone. Kyle opens the attic door and is pulled inside. Kelli and Leigh try to get into the attic but the door is slams shut. Kyle fights back as a bag is put over his head. Kelli breaks the door open and witnesses Kyle being stabbed with the unicorn statue, then one of his eyes being ripped out and eaten. The two women eaten! Leigh attacks the figure and is thrown across the attic, discovering her half-sisters body still in the rocking chair. The figure attacks Kelli and Leigh tries to help but is knocked into a hole in the floor. A bag is put over Kelli's head but she grabs the unicorn statue and stabs the figure in the eye. She gets up and sees the figure has a glass eye...it's AGNES! Kelli tells Agnes everything is okay and she doesn't have to do this. She tells him her brother isn't here, he is still locked away. Agnes tells her that she doesn't have a brother...only a father. Billy comes from behind and lights a candle.
Agnes attacks Kelli but is knocked into another hole in the floor that pins her between the walls! Billy pushes Kelli into the same hole, accidentally knocking over the candle. Kelli has grabbed onto a string of Christmas light attached to a small tree, trying to keep from falling completely in. She screams for help as Agnes starts to crawl up the hole. Leigh comes to her rescue, smashing open the wall. Agnes grabs Leigh's head but she manages to fight her off. Leigh runs through the house and smashes out another wall, finally reaching the spot where Kelli is trapped. Billy is climbing into the hole and Agnes is crawling up it! Leigh grabs Kelli and pulls her to safety as the Christmas tree catches fire (along with the rest of the attic) and falls into the hole, burning Agnes and Billy. The two survivors rush outside...
At the hospital Kelli is going to have some tests done to make sure she is okay. Leigh has a present in her hand from Clair. She tells Kelli she wants to open it now because she won't be able to open it in front of her family. She says that she is glad she got to know Clair before all of this happened. She opens the present and finds a watch engraved with "Sisters Forever." She starts to cry as a nurse comes in and tells Kelli they need her for some x-rays.
In the morgue the medical examiner is not happy that he has to work so late. He hears a body bag unzip and goes to look at it. Suddenly a badly burned Billy appears, grabbing a power saw and slicing the examiner open. Billy opens the body bag of Agnes and is happy to find her still alive.
Some time later Leigh goes back to Kelli room to see if she is back from the x-rays. A body with blonde hair lays in the bed, but as she approaches the person turns over to reveal Agnes. Leigh screams as Agnes grabs her by the throat and snaps her neck.
Kelli comes back into the room and feels something is wrong. She finds Leigh's new watch. She sees blood on the ceiling above her and starts to leave the room, but Agnes grabs her from behind the curtain and starts to strangle her. Kelli grabs a defibrillator paddle and shocks Agnes in the head with it, killing her. Billy comes down from the ceiling, as Kelli rushes from the room. She grabs some crutches that are in the hall and starts to beat him with it, losing control and screaming "Merry Christmas you fucker!" She turns to run, thinking he is unconscious but he grabs her foot, causing her to fall over a medical cart. Billy grabs a scalpel from the pile of medical supplies now on the floor and takes chase. Kelli rushes to the stairs as Billy comes from behind, slashing her with the scalpel. She grabs him and throws him over the stairway, causing him to fall on a Christmas tree below. His intestines spew out, he is very much dead, and Kelli is left to look on in shock.