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In downtown Manhattan, Kris Kringle, a white-bearded man, protests to Doris Walker, the organizer of the annual Macy's Thanksgiving Day Parade, that the man who will portray Santa Claus is drunk. Doris then hires Kris to substitute for the now unconscious Santa. When Doris, a widow, returns to her apartment, she discovers that her young daughter Susan is watching the parade from the apartment of their neighbor, lawyer Fred Gailey. Doris joins them, thanks Fred for his kindness to Susan, and learns that he has been cultivating a friendship with Susan in hopes of meeting her. Later, at Fred's instigation, Susan wrangles an invitation for him to join them for Thanksgiving dinner. Because of his successful portrayal of Santa during the parade, Kris is hired to be Macy's store Santa. Although Mr. Shellhammer, the head of the toy department, advises Kris to suggest certain toys to indecisive children, Kris instead tells harried mothers where to find the toys their children want, even if it is not at Macy's. Shellhammer is about to fire Kris, when one of the mothers thanks him for putting the Christmas spirit back into the holiday and vows to do all her shopping at Macy's. Later, when Fred brings Susan to visit Santa, Doris, who was disillusioned by a bad marriage to Susan's father, chastises him for filling her head with myths and fairy tales. While they quarrel, Susan witnesses Kris speaking Dutch to a Dutch orphan and begins to think that Kris may really be Santa Claus. Doris then asks Kris to tell Susan who he really is and when he insists that he is Santa, she asks to see his employment card. Learning that he has given his name as Kris Kringle, Doris becomes afraid that he is insane and is about to dismiss him when store owner Macy praises her and Shellhammer for developing the new policy he believes they have instituted. Afterward, Shellhammer dissuades Doris from firing Kris and suggests that she have him evaluated by Sawyer, the personnel director. In the meantime, Doris calls Dr. Pierce, the head of the Brook's Home for Old People, where Kris lives. Kris passes his psychological tests, but the bad-tempered Sawyer recommends his dismissal anyway. Pierce counters by saying that Kris suffers from a delusion for good and insists that he is not dangerous. He further suggests that Kris live closer to the store until his job ends. Fred, having seen the positive effect that Kris has on Susan, offers to let the old man stay with him. That night, Susan reveals to Kris that she wants a real house for Christmas and shows him a magazine picture of her dream house. Although Kris makes no promises, he does agree to try to get it for her. One day, Kris has lunch with seventeen-year-old Alfred, a janitor who plays Santa at the YMCA. When a disconsolate Alfred reveals that according to Sawyer, playing Santa is evidence of a guilt complex, Kris angrily confronts Sawyer and hits him on the head with his cane. Sawyer lies about the causes of the encounter and, using a series of ruses, contrives to have Kris committed to the mental ward at Bellevue. Because he is convinced that Doris participated in Sawyer's plot, Kris deliberately fails his competency tests. The hospital then contacts Fred, who, after questioning Kris, agrees to help him gain his release. Fred successfully swings public opinion in Kris's favor, and at his trial, announces that he will prove that Kris actually is Santa Claus and is therefore sane. Judge Henry X. Harper is distressed by Fred's announcement as he is up for re-election and does not want to alienate either parents of children who believe in Santa or those who think Kris is a crazy old man. Doris tries to talk Fred out of his decision, and learning that he quit his job in order to defend Kris, accuses him of being unrealistic. The next day in court, Fred calls his witnesses. Macy testifies that he believes Kris is Santa, then fires Sawyer. After District Attorney Thomas Mara's young son testifies that his father told him there is a Santa Claus, an embarassed Mara concedes that there is a Santa Claus, but insists that Fred must produce official proof that Kris is the one and true Santa. That night, Doris and Susan write Kris a note to cheer him up. A postal worker, seeing the courthouse address, then decides to send all the letters addressed to Santa to the courthouse. On Christmas Eve, Fred uses the bags of mail as official proof from the U.S. government that Santa exists, and the judge happily dismisses the case. On Christmas, Susan, Doris and Fred celebrate with Kris at the Brook's Home. Kris presents Pierce with an X-ray machine purchased with a bonus from Macy's, but Susan is so disappointed that she did not get her wish that she announces her disbelief in Santa. Doris, who has fallen in love with Fred, then explains that it is important to believe in something even if common sense says otherwise. After the party, Fred drives Doris and Susan home, following directions from Kris. To Susan's delight, they drive right past her dream house, which is for sale, and she rushes out of the car into the vacant house. Susan's excitement prompts Fred to propose to Doris, and when she accepts, he notices Kris's cane leaning against the wall.