Mr. Garrison desperately tries to get fired from his new job as South Park Elementary's 4th grade teacher and presents his assistant, Mr. Slave. Meanwhile, the boys get sent to the Deathcamp of Intolerance for not tolerating Mr. Garrison's intolerable behavior. Lemmiwinks the gerbil guest-stars.
In this episode, Mr. Garrison is promoted from being the kindergarten teacher to the fourth grade teacher, after having been previously demoted for admitting to being a homosexual. However, realizing that getting fired could allow him to sue the school for millions, he decides, along with his S&M partner, Mr. Slave to do outrageous acts in the classroom, culminating with performing gerbilling with the class pet, Lemmiwinks.
The children's parents, hearing the children complain about their gay teacher, feel they are intolerant and send them to the "Museum of Tolerance" (where, at the end of their tour, the museum guide interrupted a haughty, condescending spiel about tolerating others to viciously castigate a smoker), and then the Auschwitz-like Tolerance "Camp" which uses arts and crafts, strict tactics, and painful labor to teach children tolerance (the story pays homage to Schindler's List). The only person who understands the children is Chef (who, after they admitted their apparent "intolerance", had asked them why they were uncomfortable around Mr. Garrison - and, when told by Kyle, made it clear that homophobia had nothing to do with their discomfort) and he himself is sent to a tolerance seminar when he told Principal Victoria.
Back at school, Mr. Garrison is set to receive the "Courageous Teacher Award" for overcoming adversity. Frustrated that he has not been fired, he doubles his efforts. Meanwhile, Lemmiwinks traverses the regions of Mr. Slave's digestive system, receiving advice from three animal spirits who have been killed while trying to escape (a Frog King, a Sparrow Prince and a Catata Fish respectively). (They sing The Ballad of Lemmiwinks, a parody of the title song from The Hobbit, along with other songs from the movie.)
At the awards ceremony Mr. Garrison appears with his lover in an extremely stereotypical and flamboyant gay manner. While Mr. Marsh and Mr. Broflovski stare in abject horror as they realize what their sons had really been exposed to, the rest of the audience continues to call Garrison "courageous" for his actions - at which point he finally breaks down and screams at them, telling them that tolerance of something one hates is different from acceptance of it as good, and that he should not be allowed to teach the way he does. Revealing his plan to get money, Principal Victoria deems him "intolerant of his own behavior". The parents apologize to their now-malnourished and emaciated kids (even Cartman would barely qualify as fat), who have been released from Tolerance Camp, and despite the children's attempts to inform their parents of Garrison's behavior throughout the episode, the parents tell them that they should have told their parents about Mr. Garrison, and about how much they "suffered" when their children were in the camp, ignorant as usual to their obvious physical and psychological trauma.
Mr. Slave and Mr. Garrison are put into the camp, as per Principal Victoria's analysis of Garrison's "intolerance", and Mr. Slave thinks of the horrible torture as "kind of fun". He suddenly coughs up Lemmiwinks, who has freed the spirits of other animals who got killed inside Mr. Slave's body. They appear to Lemmiwinks, and crown him the Gerbil King. Lemmiwinks exits the scene with the Ballad of Lemmiwinks playing over the credits.