It's the annual Christmas party at police headquarters, and everyone is full of holiday cheer. Monk, Natalie, Captain Stottlemeyer, and Lieutenant Disher are all there. When it comes time to exchange Secret Santa presents, Captain Stottlemeyer has a problem: he's unable to find the gift he bought for his friend, Detective Chasen. At the suggestion of Alice Westergren, another police officer, Captain Stottlemeyer takes a bottle of port that he received from an auto body shop and re-gifts it to Chasen. Detective Chasen drinks the port, collapses and dies. The port was poisoned!
The holiday party is now a dismal crime scene. Everyone is in shock, especially Stottlemeyer, for whom the port was intended. The people at the auto body shop are quickly discounted. Lieutenant Disher then creates a list of people with grudges against Stottlemeyer. But Stottlemeyer doesn't need to hear a list. He knows who tried to poison him. It was Frank Prager.
Frank Prager tried to shoot the Captain months before, outside a bar. The Captain had killed Prager's brother during an arrest, and Prager appeared to want revenge. Monk goes to the bar where the shooting took place to investigate. Monk notes that Prager took five shots at Stottlemeyer from close range and missed. Why? Monk also notices that the bullet holes from the shooting seem to form a pattern. Monk suspects that Prager may not be their man.
Monk wants to talk to Prager, but he's been hiding from the police. Monk goes undercover with Natalie, first as a Christmas caroler, then as a shopping mall Santa, in search of their suspect. They eventually learn that Prager is hiding out in a nearby church, where Stottlemeyer and Disher take Prager into custody.
Prager says that he never intended to kill the Captain. Rather, he wanted to send a message, reminding the Captain of his brother's death. Monk turned out to be right: the bullet holes left by Prager's gun were not random. They made a pattern, an 'M' for Prager's brother, Michael. So if it wasn't Prager, who could it be?
Christmas morning arrives with the mystery still unsolved. Monk is at Natalie's house opening presents when he notices something: on his Secret Santa present from Alice Westergren, the card is folded because it's too big for the envelope. Monk remembers that the card on the poisoned bottle of port was too small. Eureka! Monk has solved the crime.
It was Alice Westergren who poisoned the bottle of port. She was having an affair with Detective Chasen, and when he decided to go back to his wife, Alice could not bear the thought. She hid the captain's original gift, knowing that he would be pressed to find one at the party. She also knew he didn't drink port, and that she could easily suggest he give the bottle to Detective Chasen as a last minute replacement. Unfortunately for her, she mixed up the cards and envelopes on the two gifts, a small but critical mistake.
Alice Westergren would have gotten away with murder, if not for a miraculous bit of detective work by Adrian Monk. But Monk is topped by an even bigger miracle. As Monk, Natalie, and Julie spend Christmas night together, snow begins to fall, fulfilling Julie's long-held wish to see snow, and providing a pleasant end to a stressful holiday.