“Dear Mom, I no longer fear Hell, for I have been to Kamp Krusty. Our nature hikes have become grim death marches. Our arts and crafts hut is, in truth, a Dickensian workhouse. Bart makes it through the day clinging to his hope that Krusty the Klown will come. But I am far more pessimistic. I am not even sure if this letter will reach you, as the normal lines of communication have been cut. So I close by saying, SAVE US! SAVE US NOW! Bart and Lisa.”
It's the final day of school. After getting Mrs. Krabappel to change the Fs on his report card to Cs, Bart, his fellow students, and the faculty and staff tear down Springfield Elementary School with chainsaws, flamethrowers, machine guns, a bulldozer, and a wrecking ball, to the tune of Alice Cooper's song "School's Out" (done by Bart). Homer wakes him up, and it turns out to be only Bart's dream, but it really is the last day of school.
Bart and Lisa are excited about being able to spend the summer at Kamp Krusty ("The Krustiest Place On Earth"), a summer camp run by Krusty the Clown, but Homer has said that Bart can only go if he gets at least a C average on his report card. At school, Bart finds that Mrs. Krabappel has given him a D- in each subject as a result of him slacking off. On the bus ride home, he uses a marker to change each grade to straight As. Bart presents the card to his dad, but Homer sees through the trick. Homer chides Bart for not faking plausible grades but tells Bart he's letting him go to Kamp Krusty anyway, for two reasons: Homer sees no reason to make Bart pay for any of Homer's mistakes, and Homer didn't really want Bart at the house all summer.
The kids of Springfield all leave for Kamp Krusty and their parents enjoy it. After they arrive, the camp's director, Mr. Black (who licenses the Krusty brand for his camp) announces that Krusty won't be around for a few weeks, and instead the bullies of Springfield -- Jimbo, Dolph, and Kearney -- will be serving as counselors and enforcing order. At Kamp Krusty, the cabins are decrepit and vermin-infested, the lake is too dangerous to swim in, and the kids are fed nothing but Krusty Brand Imitation Gruel ("Nine out of ten orphans can't tell the difference"). They're forced to sing a song about how much they love the camp while images of everything that's exactly the opposite of what's in the song flash over the screen. For the obese kids, they're under a completely inhumane, workout boot camp which is under lock and key. Lisa tells Bart that she feels as if she's going to die soon, but Bart insists that Krusty will come and the harsh winds outside tear the cabin apart. Meanwhile, with the kids gone, Homer and Marge are enjoying a wonderful summer together. Homer has even grown two extra strands of hair and lost a few pounds. Marge sends them a letter saying she hopes they're having a good time at camp and sends them jellybean cookies which are stolen and eaten by Kearny, who tells Lisa that her mom's cooking sucks. Lisa sends a letter back to Marge, describing how the camp's arts and crafts are nothing but sweatshops where the kids are forced to make wallets for export while showing them sewing to a drum beat by Kearney that their hikes have become brutal forced marches while showing Millhouse being force to walk despite suffering a snake bite, and basically explains how the camp was more of a forced labor camp than summer camp, but Marge and Homer think she's exaggerating. Bart clings to the hope that Krusty will come and save the kids. Krusty himself, unaware of any of this, approves more shoddy merchandise bearing his name before heading off to Wimbledon.
The scene cuts to the campers at the camp curfew who are all dirty, tired and worn from the terrible environment and care at the camp. Then Mr. Black walks on to the stage and announces to the campers that Krusty has finally arrived, and Bart is excited saying that he came to save them, but it's just local drunk Barney Gumble sloppily dressed as Krusty. Everyone gasps as Bart shouts out that it's not Krusty. Mr. Black chuckles nervously and asks Bart if he thinks that he just put a clown suit on a drunk. Unfortunately for him, Barney, ruining what little illusion he had to being Krusty, talks trying to convince them that he's really Krusty (or rather, "Krunchy"), and then burps loudly. At this point, Bart has finally had enough of being in complete hell and rallies everyone up by saying this isn't the first time his hopes have been let down by Krusty. They all start to chant saying they want Krusty furiously and start throwing things. Mr. Black turns to the bullies furiously saying that he thought they'd broken their spirts and slaps them when they insist they did. Bart shouts "Lets Get 'Em" and the campers drive Mr. Black and the bullies to their hydrofoil. The campers destroy the camp while Bart frees the obese kids and Lisa gives the kids the mail that was kept from them and eventually Bart takes down the Kamp Krusty flag and puts one up that says "Camp Bart". Lisa angrily says to Bart that he said he was going to name it "Camp Freedom" to which he replies " This has more zing." The scene cuts to Homer and Marge doing yoga which is interrupted by the news of the revolt to which Marge gasps. Channel 6 newscaster Kent Brockman arrives at the camp to report on the revolt. When Homer watches the live broadcast on TV and learns that the rebel leader is Bart, he instantly loses his newly-grown hair and gains back his weight. Brockman says, upon arriving at the scene, that he has been to Vietnam, Afghanistan and Iraq, and that "without hyperbole, this is a million times worse than all of them put together."
Because of the camp crisis, Krusty is called back from Wimbledon in England and comes to the camp to apologize to the kids, saying he was offered "a dumptruck full of money" in exchange for putting his name on the camp. At first the children are doubtful that he's the genuine article, given the camp staff's attempt to dupe them earlier, but they realize he is who he claims after ripping off his shirt and looking at the marks on his bare chest. To make it all up to the campers, he offers to take them to the happiest place on Earth: Tijuana. The kids and Krusty have fun together in Mexico, which is shown in a montage of pictures over the closing credits.
As described in the DVD commentary, Kamp Krusty's script was suggested by James L. Brooks as a possible Simpsons movie. However, due to problems with making the story long enough for an 80-minute film, the idea was dropped.