In the first years of the Demon Age, a horrible demon named "Dragon Master" was revived by his minions in hell. To protect the peace of the overworld, the two eldest Fuuma brothers fought the Dragon Master. Both were unable to defeat him and were killed, losing their legendary Wave Swords, also called Hadoukens. To avenge their deaths, the last of the Fuuma brothers vowed to slay the Dragon Master, and take back the Hadoukens. Getsu Fuuma Den is an action game with slight RPG elements. You travel through the overworld on pre-determined paths, which branch most of the time, leading you to shops, places where you can encounter other characters, and dungeons. Once you descend into a dungeon, you navigate your character on a platform, jumping and fighting enemies with your sword or other weapons. There are also a few first-person dungeons later in the game. In the dungeons you can collect money and then use it to buy weapons and other accessories on the overworld.

In the first year of the Demon Age, the demon lord Ryuukotsuki escaped from hell and plotted to conquer the surface world ruled by the three Getsu brothers . The Getsu brothers fought against Ryuukotsuki, each wielding one of the three spiritual Pulse Blades that have been passed within the clan for generations. However, the brothers were ultimately defeated by the demon and only Fuuma, the youngest of the three, survived. Vowing to avenge his slain brothers, Fūma ventures into Kyouki-tou to recover the three stolen Pulse Blades and summon the spirits of his brothers to defeat Ryuukotsuki.