The episode begins at South Park Elementary, where Butters Stotch believes that he is using an Oculus Rift and is in virtual reality. In reality, Eric Cartman has just tricked Butters into believing he is in virtual reality. However, Butters wants to take off the Oculus, after doing things like touching Stan Marsh, which would expose Cartman. Cartman tells him to go to Cartman's room.
Butters goes to the Cartman Residence and into Cartman's room, where he exits "virtual reality".
At lunch, Cartman is bragging about how he tricked Butters. Stan says that Cartman shouldn't mess with him, but Cartman, in defense, says that Butters is "an asshole", only to have Butters show up and call everyone stupid, unwittingly cementing Cartman's point.
That night, Butters goes back into "Virtual Reality". First, Cartman makes him shovel snow for money. Stan watches from his window and rolls his eyes at the ridiculousness of Butters' gullibility. Cartman wants him to go back to the access point, A.K.A. Cartman's room, but Butters doesn't comply.
Instead, he goes to his own house and punches his father in the testicles. Butters goes on a rampage, resulting in him being stabbed by a prostitute and taken to the Hells Pass Hospital.
At the hospital, Butters learns that he is grounded. Cartman appears and convinces Butters, while doing rudimentary magic tricks, that he is still in the Virtual Reality and that if he mentions it to anybody, they will kill him.
The next day, at the bus stop, the boys wait for the bus. Kyle Broflovski scolds Cartman for traumatizing Butters, but Cartman is happy since he got away with it. Cartman then receives a phone call from the Oculus Rift Customer Service representative, Steve. He tells Cartman that the Oculus Rift headset he ordered had a "problem", and that Cartman is actually stuck in the Virtual Reality and is in his room, in a coma-like state. Cartman is in disbelief and repeatedly denies the accusation.
At the Cartman residence, Liane Cartman brings Cartman a sandwich. It is revealed that Cartman is in a coma-like state whilst using his Oculus Rift.
Later, Butters is grounded in his room. Moments later, Cartman arrives to figure out if Butters is messing with him. Cartman explains how he could be the one stuck in Virtual Reality and that if you are grounded in Virtual Reality, then you are grounded in real life too, scary Butters.
Meanwhile, Stan and Kyle are playing Tetherball, when Kyle gets a phone call from Butters who says that he has been grounded for no reason and to check Cartman's room, only to be cut off by Stephen. Kenny McCormick then shows up and tells Stan and Kyle about Cartman.
Stan, Kyle, and Kenny go to Cartman's room, to find him in his coma-like state.
Steve, the customer service representative, is getting a variety of calls until he gets one from Kyle. Kyle explains the situation and Steve explains that there is an issue with the Oculus headsets and that they are doing a total recall. Steve then practically begs for Kyle to say that Steve has done a good job, but he hasn't. Kyle continues to ask how to help Cartman. Steve says that someone is going to have to go into Virtual Reality in order to save him.
Cartman is trying to convince himself that he is not in Virtual Reality. Kyle then shows up to help him but Cartman seems to know what's going on and tells Kyle to come with him to his backyard.
In Cartman's backyard, Kyle tries to explain the situation. However, Cartman is skeptical. Cartman, then reverses the situation, saying that Kyle is the one in a coma. Eventually, both do not believe one another.
Kyle calls Best Buy to see whether either of the two had purchased an Oculus headset. The Best Buy Employee transfers them to customer service.
Steve picks up the call, making both Kyle and Cartman uneasy.
At the Stotch residence, Linda and Stephen Stotch eat dinner and discuss Butters' being grounded, realizing that they don't remember why Butters was grounded.
Meanwhile, Stan is talking to customer service, while Kenny is in the Virtual Reality. Kyle and Cartman show up and are baffled to find out that everything was real. Kyle thinks that they've all been there, taking turns using the Oculus Rift. Cartman still believes this is Virtual Reality and that he is a computer program and that he is not real.
Stan asks Steve who first called about the Oculus and it is revealed that it was Butters. They all go to Butters' house.
Meanwhile, Steve gets a call from himself, who says that nothing the other Steve is seeing is real and explains that a customer, who was in Virtual Reality, called customer service and created a customer feedback loop, or a customer feedback vindaloop.
At Butters' house, Stan, Kyle, and Cartman arrive to Butters' chagrin. He is grounded so he is not allowed visitors. Kyle asks Butters when he called the Oculus Rift customer service and Butters explains that he did when they all first started messing with the Oculus Rift, then he forgot he was in Virtual Reality and got grounded, and then grounded again in real life. Stan asks Butters if they are in the real world and Butters confirms it. Cartman, however, still believes he is a computer program and that someone other than him is in a room using an Oculus headset and watching all of this. Stephen comes in and starts yelling at Butters.
Steve, who is still in a call with Stan, explains that Stan is stuck in a paradox, because in Virtual Reality, you cannot die, get grounded, or call customer service. Stan continues to prod, but Steve only cares about whether he has provided satisfactory answers to Stan's questions. Stan says that he hasn't. Steve explains that that is the paradox. Stephen is about to whip Butters with his belt. Stan finally agrees that Steve has provided satisfactory answers, causing Stephen, Butters, Kyle, and Cartman to disappear.
Stan immediately tries to reach his friends, who are talking to him. They ask him if he remembers and he does. He starts to head back to the access point.
Stephen and Linda are eating when Stephen realizes Butters is not grounded and ungrounds him. Butters goes outside and plays.
Stan goes back to Cartman's room and sits at the computer. He takes off his headset, revealing that Stan, Kyle, Cartman, and Kenny were trying the Oculus headset in real life. Stan finds the Oculus to be cool, but that the graphics suck. Butters appears, with excitement, to tell the boys that he is not grounded.
AV Club gave "Grounded Vindaloop" a "C+" rating saying: "I have no idea what actually “happened” in “Grounded Vindaloop.” I don’t think I’m supposed to. I mean, I have a vague idea—Stan was the one who got trapped in the Oculus because someone called customer service, but from there, everything gets a lot messier. The whole joke of the episode, particularly the second half, is in the endless “revelation” scenes, parodying a few different things which function as narrative shell games, refusing to play fair with audiences (though Inception and Total Recall, which is explicitly referenced here, spring most clearly to mind). And, like that movie trope, “Grounded Vindaloop” just gets tired after a while."
IGN gave "Grounded Vindaloop" a "8.0" rating saying: "This week's South Park wasn't particularly hilarious, but it was easily one of the smartest episodes of Season 18 thus far. Boasting a creative and well-executed virtual reality storyline, "Grounded Vindaloop" kept me guessing until the very end."