The series follows Jay (Troy Wagner), a young man who attempts to find out what happened during the filming of "Marble Hornets", a student film project of his friend, Alex Kralie (Joseph DeLage), three years previous. Alex abruptly ended the project after two months of production and has since been secluding himself from society. Before cutting contact with Jay, Alex gave the film tapes to Jay while telling the latter never to talk about it with him again. Jay discovers that the filming seemed to be hampered by a figure known as "the Operator", who begins invading Jay's personal life after he watches the tapes, inducing him to set up cameras in his apartment. Posting the tapes to YouTube as "Entries" also nets Jay cryptic and threatening responses from a user known as "totheark". Jay's attempts lead him to meet with one of the film's cast members, Tim (Tim Sutton), and a visit to the abandoned house of another cast member, Brian (Brian Haight), where he has his first encounter with a masked figure. Jay also finds a tape showing Alex leaving his cameraman Seth (Seth McCay) at a red tower when confronted with the Operator, and deeming all of the cast and crew of Marble Hornets "gone". Eventually, threats of stalking from totheark causes Jay to flee his apartment, which is subsequently burned down. Jay sets out to find Alex after receiving a video mail of Alex and his girlfriend, Amy (Bethann Williams), being attacked by the Operator.

Seven months afterward, an amnesiac Jay wakes up in a hotel room and meets with a similarly amnesiac young woman, Jessica (Jessica May), who subsequently disappears. He unlocks a safe containing videos and a hard drive revealing the events that transpired during the previous seven months, including his run-in with Alex which saw them forming an alliance to find Amy. Jay learns that the masked figure is Tim, who cooperated with a mysterious hooded figure in his attempt to kill Alex. Having been driven insane by the terror of the Operator and suspicious of Jay sneaking on him, Alex killed a stranger whose body was taken by the Operator. The videos also reveal that Jessica is Amy's roommate, who, when contacted by Jay in his investigation, is unintentionally dragged into the case. When an insane Alex attempted to kill Jay and Jessica, the two escaped with the help of Tim and headed down to the hotel, where the Operator erased their memories.

Having no lead in finding either Alex or Amy, Jay enlists Tim under the pretense of finishing Marble Hornets. While Tim is initially furious upon learning about Jay's true motives, he decides to continue assisting him. It is revealed that Tim was formerly committed to a mental hospital due to hallucinations that he fears were caused by the Operator; his hallucinations are what are driving him to enter his "masked" state, and only a certain kind of medicine is able to counteract that. Subsequently, Tim suffers through psychological torments by the Operator, which is further hampered when the medicine is stolen by the hooded figure. Tim is also revealed to have hidden a video showing him and the hooded figure being the ones responsible for kidnapping Jessica before the Operator took hold of her. When Jay becomes trapped and killed by a lurking Alex, Tim carries on by himself and eventually learns the identity of the hooded figure: Brian, shortly after Tim sees him fall to his death. During Tim's final confrontation with Alex, Alex reveals that he wants to kill anyone with knowledge of the Operator, including Amy and Jay, and then himself, as the Operator cannot materialize if there is no one who believes in him. In the ensuing struggle, Tim finally manages to kill Alex by stabbing him in the throat. The Operator then appears and leaves with Alex's body.

Four days afterward, Tim voluntarily commits himself again to a mental asylum and reunites with Jessica, whose location has been hidden by him to protect her from the Operator's clutches. Tim's final encounter with Jessica ends ambiguously as Tim lapses into a coughing fit as the camera distorts and then cuts to black. When the footage resumes, Tim is alone, driving away and stopping at an intersection while sirens can be heard in the distance. The final image of the series is a text card that simply states "Everything is fine".