The Observation Car is a passenger train car coupled to the back of the Polar Express. Unlike the other passenger cars, the seats are sideways, facing away from the walls. It has lamps between the seats. The interior design is also different. In the back, there is a patio without a door where passengers can watch the view from the back of the train.
When Billy first gets on the train, he decides to sit in the observation car, away from all the other children. After the all children are served hot chocolate, Hero Girl and the Conductor go to the observation car to give some to Billy, then go back to the car in front of it.
The Conductor takes Hero Girl to the observation car again after finding out she lost her ticket. Hero Boy follows them after finding the ticket in the air vent. He asks Billy where they went, but Billy says nothing, instead looks up at the window where a shadow from the train's roof is seen. Hero Boy goes there himself and meets the Hobo. The Hobo helps Hero Boy get to the locomotive where he finds Hero Girl driving the train.
Later, Hero Boy and Hero Girl see Billy looking out from the back of the observation car, singing "When Christmas Comes to Town", which Hero Girl joins in after the first verse. When the song is over, the Northern Lights form. The Conductor comes to inform the children that they have crossed the Arctic Circle and shows them the lights in the distance, which are from the North Pole.
When the Conductor and the children get off the train, they notice that Billy is staying behind in the observation car, so Hero Boy and Hero Girl (unknowingly followed by Know-It-All) go to try to convince him to come. However, Hero Boy accidentally steps on a lever which uncouples the car, causing it to speedily roll away from the Square and down a hill. Hero Boy tries to find the emergency brake, but to no avail. The Hobo suddenly appears again and taps on the brake wheel before disappearing again when he crashes into a wall. Hero Boy turns the wheel and the car stops on a turntable, which starts to spin. When it stops, the children get off and try to find their way back to the Square.
Before the children get back on the train for the return journey, four of the elves use a Handcar to retrieve the observation car and re-couple it. However, Billy decides to sit with all the other children this time.
The observation car is based on a Strasburg Railroad coach, like all the other passenger cars.
The observation car is mostly blue with a red stripe going along the side windows. The roof is black, though this is hardly noticeable due to it being mostly covered in snow. This livery is shared with all the other passenger cars. On the back, there is a symbol, which consists of the letters "PE" (the abbreviation for "Polar Express") in yellow on a red circle. This is not present on any of the other cars.
Some merchandise lines portray it with the words, "Polar Express" in yellow on the sides above the windows, like the other passengers cars. In the film, only one of the passenger cars has it and it is below the windows.
- In The Polar Express Ticket Chase, the observation car is referred to as a caboose.
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