The series seven winner failed to hold on to her crown as she competed against three other former contestants in the festive episode.
Instead, series eight finalist Steven Carter-Bailey was awarded the title of Star Baker, as well as receiving the first-ever Hollywood Hug.
Candice crafted a series of successful bakes during the three challenges, but could not compete with Stephen, whose designs were deemed “unbelievable” by Paul Hollywood.
The episode had seen the pair competing alongside 2015 finalist Tamal Ray and Kate Henry, who was on the show in 2014.
The signature challenge saw the bakers tasked with making a vibrantly decorated iced stollen wreath, while the technical saw them bake four snow eggs of French meringue floating on a sea of Crème Anglaise.
For the showstopper, they were asked to make a 3D New Year’s resolution cake.
Candice, who became famed for her crimson lips during her original stint on the show, said her resolution was to wear more lipstick, baking a pair of lips and a tube of red lipstick.
However, it was Stephen’s creation that rated better with the judges, after he recreated his grandmother’s rotary telephone and the table she sat at each week to call the family in order to demonstrate his resolution was to communicate with his family more.
Following his win, Stephen said: “That felt really, really good. It was a challenge to walk back into that tent. To do it and win is an immense feeling. What a start to 2019. It couldn’t be better.
“I’m going to walk away and start 2019 with three new friends, and a new plate.”
Candice added: “I’ve learnt that Steven is unstoppable when it comes to fondant, and I have learnt that I still love ‘The Great British Bake Off’.”
She added: “I came here as a winner, and of course it would have been nice to do that double but it was really good fun. It was great to be back.”