Using Linq to group a list of objects into a new grouped list of list of objects

Your group statement will group by group ID. For example, if you then write:

foreach (var group in groupedCustomerList)
{
    Console.WriteLine("Group {0}", group.Key);
    foreach (var user in group)
    {
        Console.WriteLine("  {0}", user.UserName);
    }
}

that should work fine. Each group has a key, but also contains an IGrouping<TKey, TElement> which is a collection that allows you to iterate over the members of the group. As Lee mentions, you can convert each group to a list if you really want to, but if you're just going to iterate over them as per the code above, there's no real benefit in doing so.

var groupedCustomerList = userList
    .GroupBy(u => u.GroupID)
    .Select(grp => grp.ToList())
    .ToList();