The Baywatch actor was drinking outside on his own before returning to the house and becoming sick.
Cami Li and Chloe accompanied him into the bathroom and were taking care of him before Cami left, leaving the pair on their own.
Chloe was then heard saying as she left the bathroom in tears: "Seriously, Jeremy that is not okay."
Nadia, Alicia, Cami and Keith spoke to her about what happened in the living area, and she said he "grabbed [her] here" - gesturing to her chest - and added that her "boob popped out".
As she was comforted by the group, Chloe said: "It was such a shock."
Jeremy was then confronted by most of the men in the house about what happened, and he said: "[I] moved her robe, but thought she was wearing a bathing suit underneath."
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He insisted: "I didn't grope her body.... I barely touched her."
Chloe then went into the Diary Room with Nadia and told Big Brother her side of the story.
She struggled to tell Big Brother that she was helping Jeremy when "he literally out of the blue, opened up [her] dressing top and grabbed [her] boob".
Jeremy was ordered into the bathroom and told to stay there until further notice.
Jeremy Jackson was today removed from the #CBB House following an incident involving Chloe Goodman. Watch: http://t.co/VQi84uMNa8 #CBB
— Big Brother UK (@bbuk) January 10, 2015
Big Brother then told Chloe that Jeremy would not be sleeping in the same room as her that night, with Chloe replying: "Thank you... I would feel safer."
Jeremy later commented that he had been mixing his alcoholic drinks, and complained when discussing the incident in the bathroom with Ken, Kavana and Nadia: "It is being turned into some sort of assault."
Perez Hilton soon insisted that he didn't think Jeremy should stay in the house, with Katie claiming that the decision should remain with Chloe, Jeremy and Big Brother.
Jeremy was then called into the Diary Room for questioning, and insisted that he went to "lift her robe as she was leaning into [his] face and asking if [he] was okay'."
"I thought it was flirtation," he added. "It is not acceptable and I made a mistake, and now I'm in boiling water for it."
Jeremy continued: "I'm being silly... I'm too emotionally-wounded to engage in any flirtation or relationship with a woman.
"I know my heart, my intentions and no matter how much I try to explain it, it doesn't really matter."
Jeremy was later given a separate area to sleep for that night.
Later in the evening, Ken warned Chloe that she should "watch herself" because Jeremy is a prominent "Jewish" film producer.
Chloe revealed the comments to a shocked Nadia, Kavana and Alicia, and Ken was subsequently warned by Big Brother.
The following morning, Jeremy went back into the Diary Room and was told by Big Brother that his behaviour was "wholly unacceptable".
Jeremy explained that he "accepted all ramifications" and left the Diary Room via the other door and entered into the outside world.
Celebrity Big Brother airs on Channel 5.
