Fritz decides he wants the Nutcracker for himself, and while pulling it away from Clara the doll is broken. Clara is heartbroken, but Drosselmeyer fixes the Nutcracker, to everyone's relief. One last dance brings the party to an end. The guests depart and the Stahlbaum children are sent off to bed. However, Clara is too excited to sleep, and she sneaks downstairs to be with her new Nutcracker doll.
Strange things begin to happen.
Huge mice almost as big as she is scurry across the floor. The clock strikes midnight and her whole house begins to transform. The Christmas tree grows to an enormous size, and a great battle ensues between the mice, led by the evil Mouse King, and the Nutcracker who has come to life to lead an army of toy soldiers. It looks as though the Mouse King might win the battle when Clara steps in and hits him with her shoe, killing him. The mice carry off their fallen leader and the Nutcracker leads Clara on a fantastic journey which begins with the wintry Kingdom of Snow.