On one Christmas Eve, a baby boy at an orphanage crawls into Santa Claus's sack as he is captivated by the sight of a teddy bear, and is unwittingly transported back to the North Pole. When he is discovered at the workshop, the elves name him Buddy after the brand label on his diaper, and Papa Elf adopts and raises him. Buddy grows up at the North Pole, believing he is an elf and accepted by the elf community, but due to his human size, he is unable to keep up with the other elves and demoted to the demeaning job of toy testing. When Buddy overhears that he is a human, Papa Elf explains that Buddy was born to Walter Hobbs and Susan Wells and given up for adoption. Susan subsequently died, and Walter, who now works for a children's book publisher at the Empire State Building in New York City, is unaware of Buddy's existence. To Buddy's horror, Santa reveals that Walter is on the naughty list due to his selfish and unscrupulous demeanor, but suggests Buddy could help redeem him.
