Inside Imaginationland, Stan and Butters engage in the battle of their lives as they fight the army of evil imaginary forces. Meanwhile, Cartman remains determined to get Kyle to suck his balls.
Aslan reminisces how Imaginationland used to be a happy place - but then the terrorists came. So many were killed, the barrier was broken down and the evil creatures arrived; and now they prepare for their final battle. The evil marches forward, with the woodland critters remarking how fun the battle will be. Aslan notes that they cannot win alone, for some have never held a weapon and they are too few in number. Aslan then notes that is where Butters comes in, for he has a power he is yet to understand.
Al Gore meanwhile is showing people video footage of Manbearpig's attack and tells them he told them it was real. He goes on to say something big has happened, and the American people need to know. Having donned a cape, he tries to fly off.
At Washington DC Memorial Hospital, Kyle's doctors discuss his status and that he is recovering but appears to have trauma to his brain because he keeps hearing imaginary voices. Kyle is currently lying in bed, but is awoken by Stan's voice in his head. Stan's voice suddenly disappears as Cartman enters pushing a trolley. Kyle asks Cartman what has happened, Cartman replies explaining about how Kyle lost the bet. Kyle angrily explains he wants to know what happened at the Pentagon. Cartman tells him to rest and tells him he has made him a sundae; but something is missing - his balls. Kyle asks what happened to Stan, and Cartman explains he got sucked through the portal and now they're going to nuke it. Kyle asks if Stan is in danger, but Cartman who is dressing up as the Pope tells him to get ready for his sundae; with extra nuts.
Jesus, the Lollipop King and a guard go to Aslan and tell him that the evil characters are nearly there. Aslan tells them to get everybody on the battlefield and to defend the castle walls and that they need Butters's power now. Butters asks what his powers are, and Gandalf explains that because Butters is real, he can imagine things into existence; he is a creator. Aslan says they need to bring Santa back first for he was killed in the terrorist attack. Butters asks how he can do this, members of the Council of Nine tell him he just has to focus on Santa and nothing else; whatever he focuses on will become real. Butters closes his eyes and thinks, and suddenly his father appears yelling "You're grounded!" and then manifests into a monstrous creature yelling "Grounded!". Butters is terrified and shakes his head yelling for it to go and it fades away. Aslan tells Butters to hurry up for they do not have long. The council members then yell at Butters to believe in Santa.
Cartman meanwhile has organized a photo shoot for Kyle sucking his balls and is asking Kevin, his photographer about the angles they can get. Kyle tells him to shut up for he is trying to watch the news. On the news the reporter explains Al Gore has leaked the tape of Manbearpig's attack and that terrorists have attacked the imagination. Now the public demand to know what's going on.
The head of military is shown at a press conference explaining the event and that the best course of action is to nuke their imaginations. After being questioned the military leader says there is no other option apart from nuking for Kurt Russell was raped by woodland critters.
The news reporter goes on to say that because imaginary characters aren't real they don't need an approval to nuke them, which has prompted a number of hippies have gathered in protest. Talking with a guest, the news reporter questions if the government will get away with it. The guest explains that would override cases such as the Cartman vs. Broflovski case. In his bed, Kyle finally communicates with Stan telling him he's in hospital and that he's hearing Stan through his imagination.
Stan explains he is walking through a Gumdrop Forest and has just seen Strawberry Shortcake. He hears a horn being blown and sees the battle beginning.
Lead by Jesus, the good characters charge, but they are suffering from many characters. Aslan orders Butters he must imagine Santa which Butters imagines, yet this version is a monstrous version.
In the hospital, Kyle sees on the news that it is declared imaginary characters aren't real, which overturns the Cartman vs. Broflovski case. Stan tells Kyle he must stall the missile's launch. Kyle leaves, to Cartman's anger who swears on his life that Kyle will suck his balls before the day is over.
Icarus tells Aslan they are losing the battle, but luckily Butters has imagined Santa into existence. Santa wields a golden axe and begins to kill evil creatures on the battlefield. Aslan tells Butters that he knows his own potential and must imagine more.
Kyle is not permitted into the Pentagon and stands with the hippies protesting. Al Gore arrives stating the nuke must be sent in; for it is the only way to kill Manbearpig. He then tries to fly off again.
Butters meanwhile has imagined a yellow bear who has a bow and arrows in his hand. Aslan tells Butters to imagine more of them along the castle walls. A guard and Robin Hood appear explaining they have defeated the vampires and werewolves but they are all being killed by the Cavity Creeps. Wonder Woman questions what can kill Cavity Creeps, and Aslan tells Butters to imagine a tube of Crest Gel. Butters does this and Gandalf notes Butters is becoming stronger. Two imaginary characters arrive with a "spy" who they have captured - Stan. Butters greets him telling everyone he has imagined Stan. Stan tells him he's real and warns the others that the government are sending a nuke in. Aslan says they can deal with the situation themselves now they have Butters who has been given the title "the Chosen One".
The Pentagon are in the final stages of preparing the nuke's launch when Cartman enters telling them imaginary characters are real. This causes the technicians to question whether things such as God, Jesus, Heaven and Hell are real. Cartman is soon escorted out yelling "Leprechauns are real Goddammit!".
Kyle is sitting outside the Lincoln Memorial when Stan contacts him. Kyle says he can't stop them nuking because they've declared imaginary things aren't real. Stan and various imaginary characters tell him he has to tell them that imaginary characters are real. Kyle says then that will prove Cartman was right and he will have to suck his balls. Stan tells him however that there is no other choice.
On the battlefield, the evil characters appear to have taken the upper hand. The woodland critters (who are attacking Popeye) ask what is coming towards them - it is Butters floating around in a protective bubble. He is giving characters better weaponry and spinach to Popeye. Aslan notes Butters is doing it and they will all be okay.
The missile is being prepared for launch. Cartman (who has been escorted back to the room) yells they are going to ruin everything. There is another security breach alert and Kyle crashes through the same pane of glass as Cartman did. He tells everyone that imaginary characters have had more impact on everybody's lives than most real people, and will still be around when they are all dead - and that makes them very real. Cartman claps at the speech, and action copied by everyone else in the room. The military leader tells them to abort the launch sequence which they do. Cartman then notes he did win the bet because imaginary creatures are real. Kyle then angrily shouts at him to let the bet go, adding that Cartman didn't care about the danger Stan and Butters were in, only about the "stupid bet," and that they can throw him in jail for the rest of his life - but he will never suck Cartman's balls. Al Gore then enters asking what happened. He learns of the mission's abort and starts randomly smacking the control console yelling "Manbearpig has to die!". The portal shakes violently and everyone and everything is sucked through; including the missile.
On the battlefield, the Lollipop King calls to Aslan that they've won the battle for all the evil characters have been stopped. Aslan yells "The day is ours!" but looking up, they see the missile which explodes destroying everyone and everything. Butters climbs out of his blank surroundings and imagines everything back to the way they were before. The Mayor of Imaginationland notes all the evil characters are trapped behind the barrier once again. Kyle asks Butters how he managed to do all this, which he replies with that he used his imagination. Cartman says he's learned something today, how anyone can make anything a reality by using their imagination. Cartman imagines himself (dressed as a King) and Kyle. Imaginary Kyle begins to suck imaginary Cartman's balls to the shock of everyone. Cartman says he told Kyle he'd get him to suck his balls before the day was over. Kyle argues that he isn't sucking his balls; it's imaginary. Cartman then tells Kyle he was the one who said imaginary things were real, which the military leader reinforces. Everyone laughs as Cartman tells imaginary Kyle how much he loves his balls (with the exception of Stan and Butters who just look shocked). Santa then appears telling Kyle that's enough ball-sucking for one day and that they need to get home. Kyle says he isn't sucking Cartman's balls but the Mayor says whatever you imagine to be real, is real.
Butters is suddenly awoken by his parents. Butters notes the whole event was just a dream and tells his parents about it. Stephen says it wasn't a dream and he knows because he read about it in the paper, and asks what he was doing when he should have been helping his mother clean up the basement. His mother tells him he is grounded. Butters is disappointed, but tries to use his powers of imagination on his parents to which Stephen says will not work in the real world, and that he is still grounded. His parents leave and Butters leans back into his bed saying "Aw, shit."
This episode, along with the other two parts of the trilogy, won a 2008 Emmy Award in the category of "Outstanding Animated Program (for programming one hour or more)". This is the first and only time the show has been nominated for this particular award category, as well as the show's third overall Emmy Award.