All of the Grave Encounters crew die or dissipate out of existence except for host Lance Preston. Lance enters a mysterious door in the building's subterranean passage, where he is captured and given a lobotomy by a ghostly doctor, before signing off one last time.
The movie is comprised of "found footage" from a reality show's final episode (culled from 76 hours of footage). The show was called "Grave Encounters," and followed the adventures of host Lance Preston (Sean Rogerson) and his crew as they investigate paranormal activity. For episode six (that turns out to be their final episode), they have arranged to spend the night locked in the now-abandoned Collingwood Psychiatric Hospital. The Hospital used to be the home to a great many insane people, presided over by a doctor who performed many lobotomies... before he was stabbed to death by his angry patients. The crew consists of three cameramen - TC, Sasha, and Matt, as well as ghost psychic Houston Gray (Mackenzie Gray).
Interviews with the local townspeople describe various signs of paranormal activity, including seeing a girl who had slit her wrists in a bathtub, windows opening, and a bald-headed man roaming the halls. As dusk turns into night, the caretaker locks the crew in. They set up cameras throughout the hospital and begin wandering throughout the various levels with handhelds. Unbeknownst to them, a window opens on its own, and the night begins in earnest. At first, the investigators are surprised and excited at the activity they witness (opening doors, loud noises, things moving on their own), but after Sasha's hair is caressed by an unseen figure, they decide to leave and send Matt to collect all the cameras (Matt disappears soon after).
The crew goes to look for Matt as the haunting become more violent. They are wholly unable to find Matt and return to the lobby to wait for the caretaker to let them out. After the appointed time for freedom passes, the crew bash down the front doors, but find that the doors no longer lead outside but simply open into another hallway. They also note that it is still dark outside although their watches all say it is the morning. The crew wander around aimlessly, but the building keeps changing to stop them from escape (i.e. the door to the roof and fire escape is walled up, they can't go back to the lobby as the stairs have disappeared). Further, all their food has rotted, leaving them only with a few bottles of water.
The paranormal activity grows ever more violent, especially towards Sasha. The group sleeps and awakens to find patient wristbands attached to them. When they come across a spectral female ghost, Houston is separated from the group and we later watch as he is strangled and then killed by an unseen entity. The remaining three find Matt, who is now dressed in a hospital gown and clearly insane. Matt says they can only leave when they are "cured." They enter an old bathroom to find all the tubs filled with blood. As TC walks past one tub, a bloody body leaps out and pulls him in. The others drain the tub, but TC has disappeared.
Several more days go by. The remaining three are also stalked by a very violent bald-headed spirit. They come to an elevator and pry it open to reveal an empty shaft. They intend to climb down to the hospital's subterranean passages, which they believe will lead them to freedom. They are attacked by the bald ghost, however, and while Sasha and Lance fight it off, the insane Matt leaps to his death down the elevator shaft.
Sasha and Lance fend off the ghost and descend to the subterranean passageway. They walk for days, finding no exit, or even the elevator shaft they came down in. Meanwhile, Sasha grows sick, coughing up blood. She and Lance collapse in exhaustion, during which a mist sweeps over them. When the mist dissipates, Sasha (like TC before her) has disappeared. This drives Lance completely crazy - he begins talking to himself and eating rats raw while being taunted by spectral voices.
Lance eventually finds a door in the subterranean passage and enters the room. He seems to be in a lab with many sketches and models of the human brain on display. He sneaks into a room to find the ghost of a doctor and two nurses lobotomizing a patient on an operating table. Lance tries to back out, but crashes into a table, attracting the ghost's notice. The camera goes black as we hear him yelling that he is not insane. Soon after, the camera clicks back on to find Lance talking directly to it. He bleeds from his eyes, clearly showing he received a lobotomy. Lance, then "signs off" for Grave Encounters for the last time, as the screen goes black.