Mr. James Dillingham Young ("Jim") and his wife, Della, are a couple living in a modest flat. They have only two possessions between them in which they take pride: Della's beautiful long, flowing hair, almost to her knees, and Jim's shiny gold watch, which had belonged to his father and grandfather.
On Christmas Eve, with only $1.87 in hand, and desperate to find a gift for Jim, Della sells her hair for $20, and eventually finds a platinum fob chain for Jim's watch for $21. She found the perfect gift at last and runs home and begins to prepare dinner, with 87 cents left.
When Jim comes home, he looks at Della with a strange expression. Della then admits to Jim that she sold her hair to buy him his present. Jim gives Della her present – an assortment of expensive hair accessories (referred to as “The Combs”), useless now that her hair is short. Della then shows Jim the chain she bought for him, to which Jim says he sold his watch to get the money to buy her combs. Although Jim and Della are now left with gifts that neither one can use, they realize how far they are willing to go to show their love for each other, and how priceless their love really is.