This episode begins with things around the world (a girl's doll, a dress mannequin and the Statue of Liberty) getting their heads ripped off by a strange plunger-like device from the sky. Courage then has a nightmare where a plush toy of himself getting it's head ripped off in a similar manner on an alien space craft. Courage wakes up screaming from the nightmare, and Eustace promptly throws him out of the room for waking him and Muriel up. Courage then goes to the kitchen to get water, when suddenly, he hears a noise outside. When he peeks outside, he stares in horror at a UFO floating in the sky. As Courage screams in horror, a fried chicken is slowly lowered out of it on a silver platter. This is the Space Chicken, getting revenge on Courage for what he did when when they last met. It then rises up, holding a plunger, and gestures to Courage implying he will lose his head. Courage screams again, and, very securely, locks the door. Muriel comes down to see what's wrong, and Courage tries to explain to her what's going on. When she goes outside to see, she gets captured by the evil chicken.
Armed with only one of Muriel's slippers, Courage rushes to her aid. He sees a strange pink light coming from the barn and goes to investigate. When he peeks inside, he screams in horror when he sees Space Chicken's UFO parked inside. He walks inside the craft and confronts his arch-nemesis, who's standing in front of two things; the first is a stool with a toilet plunger overhead, and the second is a slideshow screen, with which the alien chicken reveals his plan to Courage: he wants to use the plunger to remove the dog's head and use it as his own. When Courage holds up a "?" sign, the alien chicken responds with another slideshow which shows what happened to him, leaving Courage confused.
Back to business, the chicken points to the stool, wanting Courage to get on it, but Courage firmly replies, "make me!" Angered, Space Chicken reveals Muriel to Courage, tied to another stool with a toilet plunger on her head. When he pulls a lever, it's clear he intends to pull Muriel's head off instead. Courage rushes outside to get help, but in his haste, he trips over a plug that connects the UFO to an outlet on the wall of the barn. Suddenly, the power in the ship goes off, thus turning off the Space Chicken's device. It's apparent Courage unplugged the cord before he runs off to get help.
Back at the house, Eustace is still sound asleep, but he's awakened by the sound of someone barging into the room. He sees it's only Courage, who shows the slipper to him and tries to tell him what happened to Muriel. But the old man only orders the dog to get away from him and tries to go back to sleep. Desperate, Courage smacks Eustace with the slipper, awakening him again and angering him even more. The dog then leads the farmer to the barn and tries to show him the alien craft, but Eustace only says he followed him outside because he was going to strangle him, and makes a leap for the poor pink dog. Fortunately, Courage ducks just in time; unfortunately, Eustace lands in the spaceship and is face-to-face with the Space Chicken. Much to Courage's horror, he sees that the evil chicken has plugged the device's cord back in, thus resuming his attempt to pull off Muriel's head.
Panicking, Courage runs back to the barn and cuts the cord with a giant pair of nail clippers. But as soon he tries to go back to save Muriel and Eustace, the door shuts on him, leaving him to hear Eustace scream as the Space Chicken pulls off his head instead. Courage manages to open the door with a blowtorch. He is delighted when he sees Eustace's head poke out, until he sees it's connected to the Space Chicken's body. Courage shoots at the newly-headed bird with the blowtorch, sending him flying away and into a barrel of water. Courage goes to save Muriel and finds she has amazingly fallen asleep. When his efforts in waking her up are proven futile, Courage puts her slipper back on and carries her to the exit. However, the Eustace-headed Space Chicken blocks their path, so Courage veers the other way to find another escape route, knocking the alien fowl away. Courage and Muriel escape by a roof hatch on the top of the craft, then they together leave the barn.
Courage sees a clothesline that is connected to the barn and the house. Carrying Muriel over his head, he attempts to walk over the line like a tightrope. When he looks behind him, he sees the Space Chicken is hot on their tail, so he must keep on going. Suddenly, Muriel loses her slipper again, and Courage trips on it, sending Muriel flying down the line. The dog hurries to her aid, and, before she falls to the ground, he grabs her by the nightgown and gets suddenly hit on the head by her slipper. When he looks up, he sees the Space Chicken stomping on his paw, trying to make him lose his grip. Courage then sees how close to to ground they are, so when the Space Chicken stops stomping on his paw, he and Muriel have reached the ground. Courage then releases his grip and flings the alien chicken all the way back to the Bagges' barn. Courage rejoices, but his joy is cut short when he hears the sound of a revving car engine coming from nearby. Suddenly, the Space Chicken's UFO flies up into the air, and completely destroys the barn. Courage and Muriel scream in horror when the space craft pulls out a mega-sized toilet plunger, intended to take both of their heads off.
Courage tries various ways to get Muriel away from the danger, including a wheelbarrow, a raft and a motorcycle, each of them ending in failure. They are stopped by the plunger the first two tries, and during the third try, Muriel loses her slipper again and it gets caught in the back tire, causing Courage to lose control of their motorcycle, which flies apart. Courage lands smack-dab in the middle of a target painted on the ground. Amazingly, Muriel appears to be unharmed and pours herself a cup of tea, but Courage is horrified as he reads the sign over her; "WARNING: Rocket Base: KEEP OFF!" Where Courage is standing is exactly where a rocket is buried! To add to his troubles, the Space Chicken's UFO is right over him. The alien bird pulls the lever and the toilet plunger lowers to the ground. Courage manages to jump away just in time. The Space Chicken unknowingly releases the rocket, which now heads straight for him and his alien craft. He tries to escape his ship via parachute, but he doesn't make the jump in time. Muriel and Courage watch the demise of the Space Chicken and his ship from the safety of the ground.
Muriel and Courage finally reach home, where the two rest on the front steps. Suddenly, Muriel sees Eustace walking toward the farmhouse, and quips "look, there's Eustace with my slipper!" Eustace's headless corpse walks to the two, causing poor Courage and his owner to scream. Before the episode ends, Courage delivers the final line, "this still shouldn't happen to a dog!" The closing circle closes on his nose, and he shouts "ow!"
- This episode is considered as a sequel to the pilot episode "The Chicken from Outer Space".
- This is the second and last appearance of the Space Chicken. The next episode to carry the "Chicken from Outer Space" name will be about his son.
- In continuity, in the pilot episode, the Chicken from Outer Space simply tried to shoot Courage, riled up he lost to him. However, this backfired and he ended up roasted. In this episode, according to the slideshow, Courage stole the Space Chicken's weapon and blasted his foe himself. It could be considered, however, that he believes it was Courage's fault and doesn't want to blame himself as a result of his arrogance, hence why he believes Courage was the one who roasted him. However, Courage is then shown to scratch his head either because he could not remember what happened or as a sign of confusion as it differs from his own account of what really happened.
- When the Eustace-headed chicken is about to jump from his spaceship, he says "stupid dog" to Courage, which means with Eustace's head, the chicken now acts like him.
- At the end of The Chicken from Outer Space, Courage says, "This shouldn't happen to a dog!" At the end of this episode, he similarly says, "This still shouldn't happen to a dog!"
- The plug that connects Space Chicken's UFO to an outlet in the barn reads "Dil". Also on the Motorbike's engine.
- At the beginning of the episode, the Statue of Liberty is decapitated by the plunger device. This episode premiered 8 years before Cloverfield, in which a similar scene occurs (only without a plunger.)