Having shown Rose the future, the Doctor intends to show her the past, and he thus sets course for Naples, 24 December 1860. The TARDIS makes the journey and materialises with some effort on both the Doctor’s and Rose’s parts. Rose is awestruck to think that she’s about to step out into a Christmas Eve that was over and gone long before she was ever born, but before she can do so, the Doctor sends her to the wardrobe; he considers his own clothing appropriate enough, but Rose’s modern attire would cause a riot in the 19th century. He’s surprised by her appearance when she returns; she’s quite beautiful, for a human. The Doctor opens the TARDIS doors, but Rose is the first to step out and make a footprint in the snow. Arm in arm, she and the Doctor walk off to see history for themselves.

Sneed’s young maid, Gwyneth, returns from her duties in the stables to find Sneed recovering from the cadaver’s attack. This isn’t the first time the dead have walked in Sneed’s funeral home -- but when Sneed admits that Redpath was killed, the horrified Gwyneth realises that things have gone too far. Though she doesn’t wish to speak out of turn, she begs Sneed to get some proper help. Sneed promises to do so, but first they must find Mrs Peace and get her back under lock and key. There’s no sign of her in the streets, and Sneed thus turns to Gwyneth, ordering her to use her Sight to track down the dead woman. Gwyneth feels her gift to be unnatural, but when Sneed threatens to dismiss her from his service unless she does as instructed, she reluctantly looks deep within herself... and senses that, before her death, the old woman was excited about seeing a great man who has recently come from London.

The man in question is Charles Dickens, who’s about to go on stage at the Taliesin Lodge. When the stage manager arrives at Dickens’ dressing room, however, he finds the great writer in a depressed, bleak mood. Christmas Eve is a bad time to be alone, and Dickens is brooding over his bad relationship with his family and the mistakes he’s made in his life. The thought of the show does little to cheer him up, as he’s been telling the same stories over and over again for so long that he fears his imagination has run dry. But his audience awaits, and Dickens thus pulls himself together and steps out on stage, to thunderous applause from most -- apart from the late Mrs Peace, who is sitting in the middle of the audience and staring blankly ahead. The crowd listens, enraptured, as Dickens begins to recite A Christmas Carol, but just as he gets to the point at which Marley’s face appears in Scrooge’s door-knocker, the dead Mrs Peace begins to glow. The crowd begins to panic as Mrs Peace lets out an unearthly shriek and a gaseous blue phantom emerges from her body...

Outside the theatre, Sneed and Gwyneth have arrived on the trail of Mrs Peace, and the Doctor and Rose have just flagged down a newspaper vendor and discovered that they’re actually in Cardiff, 1869, rather than Naples, 1860. The Doctor then hears the screams from the theatre and rushes to investigate, with Rose hot on his heels. Inside, Dickens is trying to convince the panicking crowd that the shrieking spectre is just some sort of theatrical trick, and when the Doctor rushes up, asking when it appeared, Dickens accuses him of somehow engineering this farce. The spectre separates from Mrs Peace’s body, which collapses into the seat -- and Sneed and Gwyneth promptly pick up her body and bundle it out of the theatre. In all the commotion, Rose is the only one to notice them go, and she chases them out of the theatre, demanding answers. Gwyneth tries to convince her that nothing’s wrong, but when Rose pushes past her to examine the old woman’s body, Sneed panics, chloroforms Rose, and orders the appalled Gwyneth to stick her in the hearse as well.

The spectre is drawn into one of the theatre’s lamps and vanishes, and the Doctor realises that it was made of gas. He then follows Rose out of the theatre, pursued by the furious Dickens, and emerges just in time to see Sneed and Gwyneth bundle the unconscious Rose into the back of their hearse and set off. The Doctor promptly boards another coach and orders the driver to follow the hearse, and when Dickens protests that this is his coach, the Doctor hauls him aboard as well. Surprised, Dickens’ driver sets the carriage in motion, and as Dickens tries to protest, the Doctor learns who he’s riding with and immediately begins gushing over Dickens’ genius and boundless imagination. Flattered, Dickens finally calms down, and when he learns that the Doctor’s 19-year-old friend is in danger, he orders the bewildered driver to keep going.

Sneed and Gwyneth lay out Rose in the viewing room, unsure what they’re going to do about her or the bizarre occurrences in the funeral home. The Doctor and Dickens then arrive at the front door, and though Gwyneth tries to turn them away, the Doctor notices the gas lamps flickering oddly and pushes past her to listen at the walls. He can hear whispers, as though there’s something living in the gas pipes. He and Dickens then hear Rose crying out for help; she’s woken just in time to see the late Mr Redpath and Mrs Peace sit up and climb out of their coffins. The Doctor kicks open the locked door and rescues Rose, but the corpses then speak in eerie, hissing voices, claiming that “the rift” is failing and begging for help. Dickens watches in shock as the gaseous spectres hiss out of the bodies, which fall to the floor as the spectres are drawn back into the gas lamps.

Later, Gwyneth pours tea for Sneed’s visitors -- and serves the Doctor his tea exactly as he likes it, without his having to ask. Meanwhile, Rose lashes out at Sneed for drugging and kidnapping her and then locking her in a room with zombies. The stricken Sneed admits that the dead have been walking for the past three months, and that they retain some scraps of memory from their former lives. Dickens tries to insist that this is an illusion of some sort, but the irritated Doctor tells him to shut up and questions Sneed further. When Sneed admits that he’s never had trouble with the gas lines before, but that the house has long had a reputation for being haunted, the Doctor theorises that there’s a rift in time and space located in the building -- and that it’s getting stronger, allowing something to slip through from the other side.

Frustrated, Dickens returns to the mortuary, examining the gas lamps and Redpath’s corpse for some sign of fraud. The Doctor follows him and apologises for his harsh words, but insists that Dickens apply his boundless imagination to what he’s seen. Decomposing bodies produce gas, so what better habitation for a creature that is itself made of gas? Dickens, suddenly weary, tells the Doctor that, while he appreciates an illusion for its own sake, he’s never mistaken them for more than that. Instead, he’s spent his life fighting injustice and struggling to improve the lot of people living in the real world. But now, it seems that the “real world” is a realm of spectres and ghosts. Has he been wrong about the world all these years, and if so, does this mean he’s wasted his life?

Gwyneth is shocked when Rose offers to help her out in the scullery, and Rose, for her part, is appalled to learn that Gwyneth only earns eight pounds a year -- and would have been happy with six. Rose tries to strike up a conversation with Gwyneth, who is fascinated by Rose’s strange ways and mortified when Rose asks her if there are any boys she fancies. Rose learns that Sneed took Gwyneth in when she was 12, after her parents died of the flu; she sympathises, and Gwyneth understands that it’s because Rose lost her own father. However, Gwyneth is content that her parents are in paradise, and that she’ll be reunited with them one day. It occurs to Rose to wonder how Gwyneth knew about her father, and Gwyneth, suddenly flustered, suggests that the Doctor must have told her. She can tell, however, that Rose has been thinking about her father a lot lately... and she can tell that Rose has travelled a long way, from a strange sort of London where the people walk around in immodest clothing and where the streets are filled with racing metal boxes and the sky with flying metal birds. She can also tell that Rose has seen the strangest of things -- “the darkness, the big bad wolf...” Shaken, Gwyneth backs away, apologising profusely -- but the Doctor, standing in the doorway, has heard everything. Gwyneth is forced to admit that she’s had this talent since she was a child, but lately it’s been growing stronger. The Doctor explains that Gwyneth has grown up on top of the time rift, and has thus become a part of it. And that means she can help them perform a séance.

Dickens is reluctant to participate in anything so ridiculous, but the Doctor persuades him to join in. With some prompting from the Doctor, Gwyneth opens herself up to her Sight, and to Dickens’ shock, blue gas drifts down about the table -- and takes the form of three angelic, humanoid figures who are now able to communicate through Gwyneth. The spectres identify themselves as the Gelth, and claim that they lost their corporeal forms in the time war that tore the Universe apart; the few that remain are dying, and they need to occupy the bodies of the human dead in order to survive. However, the rift is unstable, and after passing through, they are too weak to control the bodies for very long; in order to inhabit them permanently, they need Gwyneth to stabilise the rift. The Gelth then vanish back into the gas lamps, and Gwyneth collapses as the stunned Dickens struggles to accept these fantastic events.

Later, Rose tends to the exhausted Gwyneth while the Doctor clarifies matters for the bewildered Sneed. Rose is appalled by the Gelth’s request for bodies, but the Doctor respects the living more than the dead, and he refuses to let the Gelth die just because Rose doesn’t like the thought of dead bodies being recycled for other living beings. Gwyneth then points out that it’s her choice to make, and although she can tell Rose doesn’t think she’s very bright, she’s made her decision; she thinks of the Gelth as angels, and will do what she can to help them. Rose still thinks it’s pointless, as the dead didn’t start to walk in 1869 -- but the Doctor informs her that Time is in flux now, and the history Rose knows can be overwritten as easily as snapping one’s fingers.

Sneed tells the Doctor that he’s seen more apparitions and walking dead in the morgue than anywhere else, and the Doctor takes the others there in search of the rift. A Gelth appears to them, thanking the Doctor effusively for his help, but the Doctor insists that this is a temporary solution only; once the transfer is complete, he will take the Gelth to another world where they can build proper bodies for themselves. The Gelth then guides Gwyneth to the source of the rift, beneath an archway in the morgue, and despite Rose’s concerns, Gwyneth opens herself up to the powers of the rift. The bridgehead is established, and Gelth begin to pour out of Gwyneth’s open mouth... far more than anyone was expecting. The Gelth above Gwyneth transforms from a cherubic blue to a fiery, demonic red, and reveals that there are in fact billions of Gelth in need of corporeal forms. Sneed orders Gwyneth to stop this, but an animated corpse grabs him and snaps his neck, killing him -- and providing the Gelth with another corpse to inhabit. The Gelth in fact intend to wipe out the entire human race and take this world for themselves...

The terrified Dickens flees for his life, and one of the gaseous Gelth pursues him out into the streets -- where it is drawn into the flame of a flickering street lamp before it recognises the danger. Realising what’s happened, Dickens musters his courage and rushes back into the funeral home, where he begins snuffing out the lamps’ flames, filling the house with gas. Meanwhile, the Doctor and Rose are trapped behind a barred archway in the mortuary, and as the Gelth-possessed corpses try to claw through to get them, they realise that they’re doomed. Rose will die a century before she was born, and the Doctor -- who has seen the fall of Troy, World War Five, and the Boston Tea Party -- is going to be killed by walking corpses in a cellar in Cardiff. They vow to go down fighting together, but before it comes to that, Dickens bursts into the room and begins snuffing the flames and turning up the lamps. The Doctor soon realises what he’s doing: as the Gelth consist of gas in their natural forms, filling the room with gas will draw them out of their dead hosts. The possessed corpses turn on Dickens, but before they can attack him, the Gelth are drawn out of the bodies, which collapse dead to the floor.

As the morgue fills with gas, the Doctor urges Gwyneth to send the Gelth back through the rift, but she seems stunned, as if devastated by her angels’ betrayal. She tells the Doctor that she isn’t strong enough to send them back -- but she can hold them here, and deal with them. Rose protests as Gwyneth pulls a box of matches from her pocket, but the Doctor sends her and Dickens to safety, promising that he won’t let Gwyneth die. But when he tries to take the matches from her, he realises that it’s already too late -- and after double-checking her pulse, he has little choice but to bid Gwyneth a sorrowful farewell. Gwyneth gives her friends time to get clear before she lights a match, sending the entire funeral home up in flames. Rose is horrified when the Doctor emerges without Gwyneth, but he sadly informs Rose that Gwyneth had already been dead for five minutes when she spoke to them; she was probably killed as soon as she opened the rift. He, Rose and Dickens sadly watch the burning funeral home, knowing that Gwyneth saved the world -- and that her sacrifice will never be known.

Dickens accompanies the Doctor and Rose back to the TARDIS to say goodbye; he intends to return to London immediately to spend Christmas with his family and make amends. Now that he knows how much more there is to learn about the world, his imagination has been inspired, and he intends to change the ending of his latest novel so that Edwin Drood is killed, not by his uncle, but by something not of this earth. The Doctor and Rose wish him good luck and step into the TARDIS, where the Doctor informs Rose that Dickens will die in 1870, leaving The Mystery of Edwin Drood unfinished -- but at least he’ll be happy for the last few months of his life. The TARDIS dematerialises, and Dickens, giddy with excitement, walks back out into the streets of Cardiff, filled with hope for the future.