The Chop Shop is located somewhere in Robot City, although it is unknown exactly where. It can be inferred that it is hidden in a remote corner of the city where other robots rarely ever go.
The Chop Shop is a nightmarish factory where bits of scrap metal, and sometimes robots who are still alive, are taken to be melted down and turned into upgrades. Vehicles called sweepers roam the rustier parts of Robot City, sucking up any discarded scrap metal and garbage lying in the street. It is also revealed that Madame Gasket and Ratchet intended to have the sweepers start sucking up rusty, "outmoded" robots as well. Once the scrap has been collected by a sweeper, it is taken to the Chop Shop and dumped in a pile onto one of the factory's many conveyor belts. There, it is mashed and broken apart by worker robots whose hands have been replaced with tools such as hammers, saws, and drills. After reaching the end of its respective conveyor belt, the scrap is dumped into a large, firey furnace. It is then melted down and used to manufacture upgrades, which Ratchet sells to other robots via Bigweld Industries. Outside the Chop Shop are numerous piles of scrap and junk, which the rusties use to "upgrade" themselves for battle.
- Madame Gasket, who is in charge of the Chop Shop and presumably lives there.
- Ratchet's father, who is seen several times dangling helplessly from a high up on a chain. It is unknown how he came to be in this state, but Madame Gasket implied that it is because they had some sort of disagreement or arguement. He seems to geuninely care for Ratchet. Despite his condition, he appears to be very optimistic and cheeful; warmly greeting Ratchet whenever he visits the Chop Shop, wishing him luck with his villainous plans, and attempting to comfort him with one of Bigweld's signature catchphrases at the end of the movie, but Ratchet angrily told his father to shut up.
- numerous other worker robots, who work tirelessly at the conveyor belts to break apart scrap.
After taking Loretta home from the Bigweld Ball, Fender is abducted by a sweeper and taken to the Chop Shop. He is dumped onto a conveyor belt, but manages to escape the workers before they can chop him up. After a close call with Madame Gasket and Ratchet, he loses his legs and almost gets thrown into the furnace. However, he manages to find a new pair of legs and puts them on (which, to his dismay, are designed for a female). Fender then jumps off the conveyor belt and escapes (it is not known how he did this, since his escape was not shown).
Following a lengthy car chase, Ratchet manages to get Bigweld into the Chop Shop to have him killed. Outside the factory, Rodney encourages Fender, Crank, Lug, and Diesel to upgrade themselves using various pieces of scrap. Together, along with Cappy, they enter the factory to rescue Bigweld. Madame Gasket has her workers attack them, and Ratchet unleashes an army of gigantic, upgraded sweepers to destroy them. However, Piper and Aunt Fanny arrive with every single outmode that Rodney fixed to join in the fight. The robots manage to defeat the workers while Rodney saves Bigweld and knocks the sweepers down like dominoes. The Wonderbot throws Madame Gasket into the furnace, while Ratchet ends up stripped of his upgrades and trapped in the same fashion as his father.