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Jim Dillingham Young and his wife Della are a young couple who are very much in love with each other, but can barely afford their one-room apartment opposite the elevated train due to their very bad economic condition. For Christmas, Della decides to buy Jim a chain which costs twenty dollars for his prized pocket watch given to him by his father. To raise the funds, she has her prized long hair cut off and sold to make a wig. Meanwhile, Jim decides to sell his watch to buy Della a beautiful set of combs made out of tortoise shell for her lovely, knee-length brown hair. Although each is disappointed to find the gift they chose rendered useless, each is pleased with the gift they received, because it represents their love for one another.

The true unselfish love that the characters, Jim and Della, share is greater than their possessions.