Homer, Marge, and Maggie attend Bart and Lisa's Christmas pageant at Springfield Elementary School. At home, Marge asks the children what they want for Christmas and Bart asks for a tattoo. When Marge, Bart, and Lisa go Christmas shopping the next day, Bart sneaks away and starts getting a tattoo reading "Mother". Discovering this, Marge interrupts the process at "Moth" and immediately takes him to a laser removal clinic and spends the family's Christmas money getting Bart's tattoo removed. Meanwhile, at the Springfield Nuclear Power Plant, Homer learns that he will not be getting a Christmas bonus.
When Homer returns home and hears about the loss of the Christmas money, he decides not to tell Marge his bad news. Instead, he does the shopping himself, buying cheap presents from a dollar store. At Moe's Tavern, Homer meets Barney dressed in a Santa outfit. On Barney's advice, he secretly takes a job as a mall Santa. Bart discovers his secret after he rips off his fake beard on a dare by his friend Milhouse, but agrees not to tell the rest of the family.
Homer receives his paycheck and is dismayed to see it is only for $13. Barney, who has received a check for the same amount, suggests betting it at the dog track. With encouragement from Bart, Homer decides to gamble his paycheck and takes Bart with him to the dog track. Although Barney recommended they bet on a dog named Whirlwind, Homer decides to bet on a last-second entrant named Santa's Little Helper, believing it to be a sign. Santa's Little Helper, however, comes in dead last (supposedly for the 25th time) and his owner abandons him. The dog follows Homer and Bart, who decide to keep him. When they return home, Homer is going to tell his family about his misfortune, but they think he brought the dog as a gift and everyone has a merry Christmas. In the ending credits, the family sings Rudolph the Red Nosed Reindeer, but Bart adds words, so Homer strangles him.
FOX was very nervous about the show because they were unsure that they could sustain the audience's attention for the duration of the episode. They proposed that they should do three 7 minute shorts per episode and four specials until the audience adjusted. In the end, they gambled by asking FOX for 13 full-length episodes. The series was originally planned to premiere in the fall of 1989, but due to major problems with the animation of "Some Enchanted Evening", the series instead began on December 17, 1989 with this episode. "Some Enchanted Evening" instead aired as the season finale.
The episode, being the first to air, lacked the now famous opening sequence which was later added in the second episode when Groening thought of the idea of a longer opening sequence resulting in less animation.
The "santas of many lands" portion of the Christmas pageant is based on Matt Groening's experience in the second grade when he did a report on Christmas in Russia. Groening also used that reference in his strip "Life in Hell" when he spoofed himself as a young man, being told that it is too bad his grandmother is from Russia, because Christmas is against the law there. Also, Matt Groening claims that this episode has been incorrectly credited with creating the "alternate version" of Jingle Bells.
David Silverman directed this episode, although Rich Moore storyboarded it and designed Flanders. Several of the scenes were laid out by Eric Stefani, brother of Gwen Stefani. In this episode, Barney had yellow hair which was the same color as his skin, but that was later dropped because of the belief that only the Simpson family should have such hair.
In its original American broadcast, "Simpsons Roasting on an Open Fire" finished 30th place in the weekly ratings for the week of December 11–December 17, 1989 with a Nielsen rating of 14.5 and approximately 13.4 million viewers. It was the second highest rated show on the Fox Network up to that point.