A special version of NiGHTS into Dreams that was originally released during the 1996 holiday season for the Sega Saturn. The story follows NiGHTS, Elliot and Claris trying to find the missing star to Christmas tree in the city they live in, Twin Seeds.

As with the previous game, NiGHTS into Dreams, the player can choose to play as Elliot or Claris on a single level called Christmas Spring Valley. When landing there, their Ideyas, crystal orbs representing human dream energy, are stolen. The goal is to recover them and order to do this, they must fuse with NiGHTS which allows for flying through the course and makes collecting 20 blue chips to destroy the jelly-fish looking machines holding them capture possible. Levels contains four Ideyas, each on their different respective paths. The next path unlocks once the machine has been destroyed and the Ideya brought back to the Ideya Palace.

The player has only 120 seconds (2 minutes) to complete each "round" and if unsuccessful, Elliot / Claris will disconnect from NiGHTS and fall to the ground. There an alarm bot will chase the player and if caught, the game is over. However, if they're able to make it back to the Ideya Palace without getting caught, they can reconnect with NiGHTS to continue the level.

Once all four Ideyas are collected the player is sent to fight a boss, a flying creature called Gillwing. Once beaten, there's a memory mini-game which allows for unlocking extra content like concept art, movies and more.

Christmas NiGHTS into Dreams is packed with easter eggs, and many revolve around playing on specific dates. For instance playing the game between January 1st and 15th will change the intro screen with a message of Happy New Year and characters will be wearing outfits fit for the season. There's also a Winter NiGHTS feature if the game is played in between January 15th - 13th, February 15-28, November 1st-25th and December 26th-31st where intro screen and characters will have a winter themed appearance. On Valentine's Day, February 14th, the Christmas Spring Valley has heart rain in the level and of course playing on the 24th or 25th of December has a chance of seeing Santa Claus in the level.