It's a Wonderful Lie is the 12th episode of season two and the 30th episode overall.
Winter in New York: a Gossip Girl checklist to surviving the cold. A cashmere stole for ice skating at Wollman Rink, Jacques Torres hot chocolate for window shopping the holiday displays, and the perfect date to the senior snowflake charity ball.
Still toying with one another, Chuck and Blair make a bet to choose the perfect date for each other for the annual Snowflake Ball. Meanwhile, Aaron's ex-girlfriend Lexi has come to town and decides to pursue Dan, leaving Serena conflicted. Jenny seeks to get revenge on Vanessa and Lily must make a choice.
At Constance, Blair and Serena are discussing the upcoming Snowflake Ball. Blair insists Serena help her go through the list of guys who want to go with Blair to the ball, although Serena doesn't want to. Chuck approaches the girls and asks which short term date is the winner. Blair asks why he doesn't think she wants something more, and he calls it a hunch. She lists the guys on the list and he finds faults with each of them. Serena spots Dan and shows him her present for Aaron for Hanukkah: a first edition Herter Norton copy of Letters To A Young Poet. He asks if that means Aaron said yes to going to the Snowflake Ball and Serena says no but that she's still planning on going anyway. Dan says he's going too, and the two can hang out. He asks Serena if Aaron is okay with them hanging out, and she says he is and mentions how his ex Lexi is coming to town. She invites Dan to come to the gallery with her and the two set off.
At the loft, Jenny is sorting Rufus' record collection to forget about how her future is going nowhere. She invites Vanessa over, who tells her that everything will work out. Jenny admits that she's also thinking about what happened with Nate. Vanessa, who is dating Nate now, tells her that it would be smart to move on and leaves when he calls her. The moment she leaves, Penelope shows up at the loft with a J. Humphrey designs ad and says she wants to commission a dress. Jenny agrees but tells her she is very expensive.
Lily is organizing the Snowflake Ball, and Rufus arrives to help volunteer. He asks if she and Bart have talked about things yet and she says no, but maybe that can be a New Year's resolution. She asks if he's planning on coming to the ball and he says he's not sure yet, but she says that if he does come, to save her a dance. Bart then shows up and tells Lily they need to talk.
Dan and Serena arrive at the gallery and overhear Aaron's ex Lexi criticizing Serena and the photos Aaron took of her. Aaron introduces Dan and Serena to Lexi. Meanwhile, Nate and Vanessa are hanging out and he asks her to come to the Snowflake Ball with him. She says she would love to, but it's maybe not such a good idea. Nate guesses that she hasn't told Jenny they're dating, and says that it doesn't matter since she blew him off and clearly doesn't care. Vanessa, knowing why Jenny hadn't talked to Nate, asks what would happen if he found out Jenny still liked him. He says he's really happy and doesn't want to ruin things. In the background, a girl takes a picture of them kissing. Back at the loft, Penelope asks Jenny whatever happened with her and Nate. Jenny says nothing ever happened, and Penelope reveals that she's planning on asking Nate to the ball. A Gossip Girl blast comes in, with the photo of Vanessa and Nate, and both girls are shocked.
During their discussion, Lily tells Bart that she doesn't appreciate him showing up unannounced. He apologizes but says he didn't have many options. He explains that it's been a long time since he's been married and promises that he fired his PI Andrew Tyler. He also says that he's going to stop controlling the kids and keeping files. He apologizes again and Lily thanks him, but says it still isn't enough. He asks what is, and reminds her that she knows he is capable of change. He tells her that he should be back from his Miami business trip to go to the ball with her, and she doesn't say yes or no. At the gallery, Aaron apologizes for Lexi's behavior. He explains that Lexi thinks she's protecting him and staying through the holidays. At the same time, Lexi is flirting with Dan in the coffee shop. Serena and Aaron make a deal that if she tries to get to know Lexi, he'll go to the ball with her. Lexi approaches them and announces that Dan offered to take her on a walking tour of Brooklyn. To hold up her end of the deal, Serena agrees to go too.
Vanessa goes to the loft to invite Jenny to get pizza with her and Jenny confronts her about lying and seeing Nate behind her back. She apologizes, and Jenny yells that she knew why Nate wasn't calling. The two argue and Vanessa storms out. At the Waldorf penthouse, Chuck goes to see Blair. He proposes that they find each other dates to the ball to see who knows the other better and Blair agrees. They decide the stakes are that if Chuck likes his date, Blair gets his limo for a month and that if Blair likes her date, Chuck gets Dorota.
On the tour, Serena tells the group how Aaron agreed to take her to the ball. Lexi hints to Dan that she would like to go, and he asks her. Aaron asks Serena if she's okay with Lexi coming. She admits it's a bit weird, but she's fine with it. Aaron then mentions how Lexi sleeps with guys on the first date, and Serena begins to get jealous. At the VDW penthouse, Chuck runs into Bart leaving for Miami. He tells Bart that he's surprised he's leaving when things are so bad with Lily, but Bart blames Chuck for their problems and leaves. Jenny brings Penelope's finished dress to her apartment, when she tells her to leave. Hazel, who is also there, tells her to tell her friend Vanessa not to fish in their pond, and Jenny says Vanessa is not her friend. Penelope is explaining how they were just discussing how to send her a message when Isabel comes out wearing a see through dress. Jenny reveals how Vanessa is going to the ball with Nate. Penelope mentions how Isabel's dress looks a little like Jenny's, and Jenny replies that she knows about lining. Penelope asks what if she didn't, hinting towards a way to humiliate Vanessa.
Blair and Serena are hanging out and she confidently tells Serena how she knows every inch of Chuck and will be able to locate the perfect girl. Serena says that seeing your ex wit someone else is never easy, and Blair asks how her lame date was the night before. She explains that Lexi and Dan are going to the ball together and that she tends to sleep with guys on the first date. Blair discovers Serena and Aaron haven't slept together yet and says that while it's okay to wait, Dan and Lexi will have sex regardless. Jenny goes to see Vanessa at the gallery and presents her with the see through dress. She says it's a peace offering and Vanessa accepts the dress. Meanwhile, Blair is directing Dorota finding Chuck's date. All the girls she finds are not acceptable and Dorota says the girl Blair thinks is Chuck's perfect match is her, but Blair insists that the right girl hasn't been found yet. Dan and Serena talk and he asks if she's sure it's okay. She's vague, and tells him she'll just see him later. Aaron shows up and Serena gives him the green light to have sex that night. In Brooklyn, the dress fits Vanessa perfectly. She admits to Jenny that she has always been jealous of Jenny and Dan because growing up, they seemed to have everything. She's about to say more when Nate calls and Jenny leaves. Vanessa answers and tells Nate she has to talk to him about something.
Lily is waiting for Bart at the penthouse and calls his secretary to find out where he is. She finds out he's in a meeting with Andrew Tyler and Lily realizes he lied to her about firing Andrew. She calls back and tells the secretary to tell him that she won't be waiting anymore and he shouldn't come to the dance. At the ball, Penelope, Hazel, and Isabel all discuss that the Vanessa plan is in motion. Blair and Chuck introduce their dates and realize they only succeeded in bringing dopplegangers of themselves and Lexi tells Dan that Serena and Aaron are going to sleep together that night. Rufus and Lily meet up and she confesses that she is going to leave Bart and the two dance. Across the room, Dan and Serena talk. She tells him about Lexi's plan to seduce him and he is surprised. She remarks how she thought sex was meaningful to him, he sarcastically replies, and she leaves. Jenny arrives at the ball, having second thoughts, and Vanessa tells her she's breaking up with Nate because she never meant to hurt Jenny. She goes to stop her from walking into the trap when she sees her with Nate and stops. Vanessa tells Nate she has something to tell him and confesses that she stole his letter to Jenny, explaining that's why he never heard from her. She breaks down in tears and runs off when the spotlight hits her, revealing the transparency of her dress. Nate, noticing Jenny, realizes it was her who set Vanessa up. He confronts her and says that even though Vanessa lied and went behind her back, she's still her friend and didn't deserve to be publicly humiliated. He shows her the letter and explains what was in it. Jenny says she never got it, and Nate says it's because Vanessa stole it but felt so bad about it she told him the truth. He also says that he's glad she never got the letter because she's not who he thought she was.
Blair and Chuck catch their dopplegangers kissing, and they explain that they realized they were meant to be. Blair tells Chuck that it's too bad that even their dopplegangers can figure things out but they can't. Lily tells Rufus that she's sorry she has to hurt Bart, and the effect on her kids. She admits to Rufus that she's always tried to do the right thing, and Rufus replies that's all she can do. He then confesses that he let her go on her wedding day because he wasn't sure what he needed and didn't know if he could give her what she needed, but that he has regretted it every day since. Chuck, overhearing everything, calls Bart to warn him. Bart is in the car with Andrew Tyler, and it's revealed that he did fire him, but that Andrew had to finish his final assignment for Bart. After hearing what Chuck has to say about the night's events, Bart decides to hear Andrew's information. Chuck confronts Lily, saying that she was good for the Bass men, and that Bart is on his way there now and she owes him a conversation.
Outside, Vanessa is getting in a cab when she's stopped by Nate. They talk, and Nate tells her that she is the one he wants to be with before kissing her. Jenny sees the whole thing before being confronted by Penelope, Hazel, and Isabel. She tells them that Vanessa is ten times the person they will ever be and that's why they hate her and she leaves. Blair and Chuck dance together, after realizing they don't want to lose what they have going on. Dan and Serena talk, and she apologizes for what she said earlier. They both admit that the night they slept together was the best night of their lives. At that moment, Lily comes up desperately looking for Chuck. Serena asks her what's wrong, and she says Bart was in an accident.
- Blake Lively as Serena van der Woodsen
- Leighton Meester as Blair Waldorf
- Penn Badgley as Dan Humphrey
- Chace Crawford as Nate Archibald
- Taylor Momsen as Jenny Humphrey
- Ed Westwick as Chuck Bass
- Jessica Szohr as Vanessa Abrams
- Kelly Rutherford as Lily van der Woodsen
- Matthew Settle as Rufus Humphrey
- Zuzanna Szadkowski as Dorota Kishlovsky
- Amanda Setton as Penelope Shafai
- Robert John Burke as Bart Bass
- Nicole Fiscella as Isabel Coates
- Dreama Walker as Hazel Williams
- Breakdown by Deerheart
- The Sun Ain't Shining No More by The Asteroids Galaxy Tour
- Sexual Riot by The Metros
- Saturday Morning (After the Funeral) by Afternoons
- Hero by The Asteroids Galaxy Tour
Blair: You think Angelina Jolie even considers a project without an offer on the table?
Chuck: You only think you like an intelligent man. The moment he gave you a history of the word mellifluous, you'd rip out his sweetly flowing tongue.
Penelope: Oh hello, weird documentary girl.
Vanessa: Bye, sad Blair wannabe.
Lexi (on the pictures Aaron took of Serena): Aww, they're adorable. You know, I feel inspired to shop at The Gap or, um, validate my self image with overpriced cosmetics. Wait a minute, you sure this one didn't just come with the frame?
Aaron: Women have been the focal point for artists throughout history and you know it.
Lexi: Exactly. Yeah, way to swing at a two thousand year old pitch and with Blondie the Bombshell no less.
Serena: Blair Waldorf is my best friend, I can handle much.
Serena: So we're friends, shouldn't I like give him a heads up or something?
Blair: Oh absolutely. Guys hate being caught off guard with sex on the first date.
Blair (on Aaron): He's hot and you actually like him! How often do you find that in the same guy? You want to wait, that's fine, but in the meantime, Dan is going to take a ride on the Lexicoaster.
Blair: If beta Bass is anything like the original, I have no doubt that sooner or later, he'll disappoint me.
Chuck: And I'm curious to see if the new Blair has all the features I so enjoyed on the old model.
Lily: Tell me something. Rufus.
Lily: Something you shouldn't.
Rufus: I never wanted to weigh in on your relationship with Bart. I was afraid of what I might say.
Lily: Which was?
Rufus: I let you go on your wedding day because... I was afraid I couldn't give you what you needed. I wasn't sure what I needed. And I have regretted it every day since.
Chuck: I wouldn't change us. Not if it means losing what we have,
Blair: And what do we have Chuck? You tell me.
Chuck: Tonight. So shut up, and dance with me.
Dan (on sex): It was meaningful, with you. It was the greatest night of my life.
Serena: Mine too.
- The episode title is based off the movie It's a Wonderful Life.
- One of the portraits in Penelope's room reappears in The Undergraduates, when she shows that her great aunt was a founding member of Hamilton House.
- On Bart's bill for Andrew Tyler's services, Jonathan's surname is listed as Henry but his last name is later stated as Whitney.
- Olympic champion gymnast Nastia Liukin appears in a small cameo at the beginning of the Snowflake Ball.
- Wollman Rink - Gossip Girl references the famed Central Park skating rink.
- Jacques Torres - Gossip Girl references the chocolate pastry chef's hot chocolate.
- Angelina Jolie - Blair mentions the actress to Serena
- Letters To A Young Poet - Serena shows a first edition copy of the book to Dan.
- M.D. Herter Norton - Dan notices Serena's copy of Letters To A Young Poet is a Herter Norton edition.
- Jeff Beck - Rufus has a record of his at the loft.
- Muddy Waters - Jenny mentions the artist while organizing Rufus' record collection.
- The Gap - Aaron's ex Lexi mentions the store when criticizing the photos of Serena.
- Norman Mailer - Dan shows his house on the tour of Brooklyn.
- When Harry Met Sally - Serena compares Lexi to the film by saying "When Harry Met Crazy."
- Christian Louboutin - Blair wears a pair of his shoes.
- Canal Street - Blair compares her doppleganger to the neighborhood.
- Janet Jackson - Vanessa references her regarding the dress debacle at the ball.