Joel told People magazine: "It's fun for us to be with a bunch of kids who are having a good time. They make you smile. Hopefully for today they're feeling special.
"The foundation is really important to me and Nicole. We're just really happy to be a part of the community and celebrating with these kids who haven't been as fortunate as us."
The Good Charlotte frontman and his heavily pregnant fiancée - who is due to give birth in January - handed out new pairs of shoes and teddy bears to the kids.
Nicole joined in as the children enjoyed face-painting, balloon animals and hot dogs, and was cheered by the children as she shouted, "Who wants to throw pies in Joel's face?"
The couple - who last month hosted a surprise baby shower for 100 new mothers and pregnant women at Hollywood's Los Angeles Free Clinic - insist they are having a quiet family Christmas this year.
Joel said: "We'll be at home and it'll be very low-key."
Nicole joked: "It'll be very boring."