On Christmas Eve, incompetent magician Professor Hinkle miserably fails at a schoolhouse Christmas celebration. Embarrassed and made fun of by the kids, Professor Hinkle discards his top hat. After school, the kids head outdoors to play in the snow and construct a snowman they call "Frosty." After his rabbit, Hocus Pocus stole his hat, Professor Hinkle went after him. A student named Karen catches the hat that the wind has blown off and puts it on Frosty's head, bringing him back to life. When Hinkle discovers the hat is truly magical, he views this as an opportunity to get wealthy. When the hat blows off, Hinkle retrieves it and dismisses their objections, saying he threw it away.
Additionally, he rejects the kids' assertion that Frosty came to life. Subsequently, Hocus returns the hat to the kids after exchanging it for a Christmas wreath. The snowman is ecstatic to have come back to life when they use the hat to bring Frosty back to life.
But as the temperature rises, Frosty worries that, unless he can reach the North Pole, he may melt. The kids propose that he take a train to go there, and as they make their way to the train station, they parade through the town, startling a few locals, including the traffic cop. Since they are too poor to pay for tickets, Hocus, Frosty, and Karen get into the refrigeration car of a southbound freight train; it is loaded with Christmas cakes and ice cream. Professor Hinkle follows them to reclaim the hat.
Karen begins to freeze as the train travels farther north, and Frosty recognizes that she is unable to endure the bitterly cold weather. The train stops to allow a passenger train to pass, and the party gets off to find somewhere to warm Karen, with Hinkle trailing behind. As dusk falls, Frosty and Hocus are having difficulty guiding Karen through the jungle. Hocus successfully gets the forest animals to construct a campfire for Karen. Frosty resolves to search for Santa Claus, whom they believe can save Karen and bring him to the North Pole, out of fear that the fire won't be good enough.
Professor Hinkle arrives and puts out Karen's fire while Hocus looks for Santa. After running away, Frosty takes Karen inside a greenhouse so she can warm up. When Hinkle gets there, he closes the door and keeps them inside.
Frosty has turned into a puddle when Hocus and Santa get to the greenhouse. Karen is devastated, but Santa consoles her by telling her that Frosty is made of magical Christmas snow and will come back each winter. Then he opens the door, allowing magic snow to be blown in by the winter wind, turning Frosty into a snowman. Just as they place the hat on him, Hinkle shows up and demands his hat be returned. Intruding that he gives up the hat and writes "I am sorry" a hundred thousand times, Santa threatens to never deliver him another Christmas present. Remorseful, Hinkle walks off to write his apology. After giving Frosty a hat to revive him, Santa delivers Karen to her home. After that, he promises to bring Frosty back to the North Pole each year, together with the enchanted Christmas snow.
Frosty organizes a parade in which the kids, Professor Hinkle, the traffic cop, Hocus, and the narrator (Jimmy Durante) all participate. Professor Hinkle is among the people wearing new hats. Frosty steals the song's final line and says, "I'll be back on Christmas Day," as the parade comes to an end and he climbs aboard Santa's sleigh as they take off for the North Pole.
