The first written account of Olentzero is from Lope de Isasi from the 16th century. Back then he was called "Onentzaro" ("Time of the good one"). Thousands of years ago there was a legendary tribe of mythical giants, jentilak ("Gentiles"). Olentzero was one of them. They lived in the forests in the valleys of the Pyrenees, in Navarra, in the area of the village Lesaka. One day people of this tribe discovered a glowing cloud on the sky. They feared that this celestial phenomenon is the divine sign of the arrival of the upcoming birth of Jesus. None of them could look at this bright cloud except for a very old, nearly blind man. They held him up to take a look. He turned pale and confirmed their wildest fear: "Yes, this is the sign, Jesus will be born soon". They feared vast changes would come jointly with the arrival and a demise of their times. After foreseeing this terrible news, he only saw a solution in terminating his life. So he asked his friends to throw him off the highest cliff. They complied. The group of giants on the way down the mountain tripped, all came to fall, and head over heels they fell to their death. All, except one. The only survivor Olentzero hiked to the villages in the valley and with his sickle brutally cut the throat of those people who ate too much on the day before the arrival of Christ, i.e. on the 24th of December. He himself was not the fasting type. He is a thick glutton who can eat a barrow-load of meat which he washes down with strong liquor. No surprise that he is frequently drunk and irritable.
In the last century this legend had to be adapted. Young kids don't like to hear about grumpy old man who slice open the throat of normal citizens and let them bleed to death. A more civilized version had to be created. More precisely the church wanted to stop pagan rites and turn people into good Christians. The church wanted to turn the pagan custom related to the winter solstice into a Christian feast with a Christian-like hero. Basque nationalism wanted an alternative to the Spanish tradition of the Magi and the French and American Pere Noel and Santa Claus. In the cleansed, Christianized variation Olentzero is a human, a humble man with a heart filled with love. As a new born he was left alone in the woods and a fairy with long blond hair found him, adopted him, gave him the name Olentzero and raised him. He turned into a strong man and worked as a coaler, turning wood into charcoal by burning it in a kiln. He was hard-working and gifted with his hands. He carved wooden animals, toys and dolls. When he had a big coal bag full of toys he hiked to the village in the valley and distributed the wooden figures amongst the kids because it made him happy to see the kids happy. He played with all afternoon. The kids loved him and Olentzero came back whenever he had finished another bag of toys. Whenever he came to the village the kids surrounded him. One day as he came down to the village he found a house in flames. He dashed towards the house finding crying kids behind the closed windows. Without hesitation he ran into the house and freed the kids by lowering them from an upstairs window. With everyone safe he went downstairs when the house collapsed under the fire, burying him. The people from the village had gathered by now outside the burning ruins and they suddenly saw a white flash leaving the flames and heading towards the sky. The fairy that had found him in the woods had come to be with him in this moment. She said, "Olentzero you have such a good heart, you even gave your life for others. You should not die. You shall live forever, making toys for all the kids in this village and in the whole Basque Country." This is how Olentzero comes to all the Basque kids on 24th of December bringing them gifts.
The Olentzero tradition coexists with the Magi and Father Christmas.
Some families may choose one or two of them, though.
Olentzero is represented as a Basque peasant with a beret and smoking a pipe.
Whether he has a beard or not is not yet a established tradition.
On Christmas Eve, folk groups carry Olentzero dummies on a chair around the streets, singing carols.
The Olentzero tradition coexists with the Magi and Father Christmas. Some families may choose one or two of them, though.