The SBPD are on a stakeout watching a drug deal play out on their monitors. They are about to take down a criminal they've had their eye on for over four months. Then suddenly, through the monitor, the SBPD sees Gus walk in pushing a room service cart. Gus starts to distract the drug dealers. Shawn then jumps out of the room service cart and starts to snoop around. He finds a bag of prescription drugs, but gets caught almost right away. With guns pointed to his head, Shawn asks the drug dealers if they are selling these drugs out of this hotel room. The drug dealers say yes, thus giving Lassiter and the SBPD the confession they needed to take the drug dealers down. But Shawn and Gus are still in danger. Guns start to go off, but thankfully no one is hurt.
The next day, Shawn and Gus think they are being called into the station to be congratulated for "catching the bad guys." However, Vick is quick to change their tune when she instead reprimands them for nearly botching the entire stakeout. Vick tells them that they could have been killed because they have zero police training and that they possess an overall lack of respect for police procedure, and therefore tells them that in order to come back to the SBPD as consultants, they need to participate in a three week crash course at the Police Academy. Shawn and Gus are excited by this prospect, as they only see the fun that will ensue, and not the actual hard work part.
Later, the guys show up at the Police Academy dressed in sweats that are exact replicas from the Police Academy movies. The instructor on duty, Officer Nick Conforth, isn't amused. He gets straight to business. Suddenly Lassiter shows up to make sure Shawn and Gus showed up. Lassie immediately recognizes Nick as one of his former classmates in the Academy. It turns out they are old rivals and Lassiter rubs it in Nick's face that he's now head detective and Nick's just a lowly teacher.
Shawn and Gus start their training and soon prove that they are not police material. Nick is embarrassed for Shawn and Gus. He suggests that they try their luck out in the field. Shawn and Gus are issued official police batons, radios and equipment. They have a little fun and pull over Lassiter. Lassiter is naturally annoyed. He then gets a call about a robbery going on at a Longsdale Check Cashing place. Lassie leaves. Shawn and Gus convince Nick to take them to the crime scene by telling him this could be his chance to redeem himself in the eyes of Lassiter. But once Nick gets on the scene he cowers and chickens out and we learn why Nick decided to lead his life as a teacher instead of a field officer.
Shawn and Gus follow the perp into a dorm building at a college. Shawn and Gus go investigate and find nothing but some hungover college kids. After finding nothing, Lassiter catches them at the crime scene. Nick gets reprimanded by the chief for bringing Shawn and Gus to an active crime scene. She suspends him. Shawn realizes his police radio is gone.
Juliet is the substitute teacher at the academy since Nick has been suspended. Shawn is loving this. He plays with Juliet and tries to discuss a current case in front of the class. After class, Juliet reveals that it was her idea to send Shawn and Gus to the academy so they don't get killed. Suddenly, Juliet gets a call from Lassie to head to a crime scene. Juliet takes Shawn and Gus with her, but once they arrive on scene, Juliet locks them in the car to keep an eye on them. Juliet's lead turns out to be a dead end, so Shawn and Gus take matters into their own hands and start to investigate a name they found earlier at the dorm: David Arnold. But they soon find out that David Arnold is a fake name and a mislead planted by someone else. Shawn and Gus realize that the fake name was created by the same hungover guys they ran into at the college dorm earlier that day.
They head back to the dorm to do a little investigating. The college kids aren't there, but they find a clue: a receipt that has 10,000 loyal shopper points from Bazo's Grocery. Suddenly, two gangsters walk in. Devry is one of them and Shawn soon realizes he's the guy whose Check Cashing place got robbed earlier. Turns out it was the two college kids, whose names we learn are Chris and Dickie, that robbed Devry's store... but why?
Shawn and Gus are now on a ride-along with McNab. The guys convince McNab to take them to Bazo's Grocery to investigate a lead they found at Chris and Dickie's dorm. They lie about their intentions at the grocery store so McNab won't find out. McNab agrees, and they show up at Bazo's.
Shawn and Gus sneak into the back where they discover that Bazo is a heavily armed bookie. They confront Bazo, trying to speak on behalf of Chris and Dickie, who apparently owed Bazo tons of money. Bazo says Chris and Dickie paid him off last night. Shawn and Gus figure it out that Chris and Dickie robbed Devry's check cashing place to pay off Bazo and could now be in serious trouble with Devry.
Shawn and Gus realize they can catch these guys, so they find Nick and recruit him to help and to redeem himself in the eyes of Lassie... for a second try. Nick agrees, grabs the scent dog, Fenway, and they head out. Fenway is able to track down Chris and Dickie's scent. But Dickie tells them that Devry just kidnapped Chris. They figure out that Devry has Shawn's walkie talkie -- that is why he is always two steps ahead of them. Dickie suddenly pulls a gun on Shawn and Gus and leaves to go save Chris. The guys have no choice but to come clean to the chief. She in turn extends Nick's suspension, and reinstates Shawn and Gus as consultants because they were able to track down their suspects before they could. But they are never allowed to wear police blues again.
Shawn and Gus realize Dickie went to Bazo's to steal the cash back from Bazo to pay Devry off to get Chris back. Shawn and Gus show up at Bazo's where a gunfight has already broken out between Dickie, Devry's men and Bazo's men. Devry starts unloading his gun on Bazo. Then Shawn gets the idea to have them take each other out. He gets on the grocery store intercom and tells the bad guys where each are hiding. Each camp starts to take each other out one by one. It's working, and all that's left is Bazo and Devry. Devry shoots Bazo and is now on the hunt for Dickie. Shawn gets the idea to take Nick's gun, and he looks for Devry. Devry has his gun trained on Shawn and has Chris is in his clutches. Shawn kicks his gun over toward Nick's direction. Nick picks up the gun, steps in, and miraculously shoots the gun out of Devry's hands and saves the day. Shawn is saved. Chris is saved. And Devry and Bazo are both caught.
Back at SBPD, Shawn and Gus are congratulated for bringing down the bad guys -- for good this time. Nick is congratulated too. Lassie offers a bit of kindness and tells Nick that the best officers come out of his classes at the academy. Vick informs Nick that his suspension is therefore revoked.