While the castle is preparing a surprise party for Esteban, Elena and Mateo take him sailing to an island where the Fountain of Youth is located. Elena and Mateo must save Esteban when he drinks too much water and becomes younger.
On the night Elena decides to appoint Mateo as Royal Wizard of Avalor, an evil malvago and old enemy of Alakazar named Fiero turns her family and the citizens to stone. Mateo must put his skills to the test to stop Fiero and save the people of Avalor
Elena visits the Kingdom of Cordoba to oversee construction of a bridge between it and Avalor but is convinced by lazy and spoiled Prince Alonso to shirk her royal duties. Elena must save the kingdom when the digging awakens a totem giant from Mayan folklore named the Yacalli.
During an archeological dig, Esteban accidentally releases a mischievous duende, a magical elf-like creature based on Latino folklore, who sets out on a mission to unleash hundreds of other duendes on Avalor.
In the Kingdom of Avalor, Elena takes Naomi up a mountain to show her favorite view of the kingdom. Elena laments to Naomi how she was trapped in the Amulet of Avalor for forty-one years, and then presents to her a broken wand. She tells her that it was Shuriki's wand and how she would still be trapped in the Amulet if it was not for a brave young Princess: Sofia. Elena then proceeds to tell Naomi the whole story ...
Elena brings all the communities of Avalor together to share each other's holiday traditions. But when a Doña Paloma scheme causes an overly competitive atmosphere, Elena sets off on a traditional "parranda" and carols through the city to remind everyone of the true spirit of Navidad.