Metal Eye 2 is set in the same sci-fi universe and is closely related story-wise to the first game. In the future, people have built the floating city Zeron, where the best scientists work on creating androids, artificial human beings who look the same way as real ones. Harvest Corporation is the biggest company that creates androids. The hero of the game is a scientist named Wirg, the father of the first game's protagonist. His work is to train the androids after they have been created. One day, the company building is attacked, and Wirg has to escape. He is saved by a nun and brought into a small town in the middle of wasteland, where his adventure begins.

The game mostly follows a traditional Japanese RPG template: Wirg and his companions (a party of three) explore the top-down world and fight random enemies in turn-based combat in first-person view. The pictures of enemies appear super-imposed on whatever location the characters are currently in, without separate battle screens. The towns have isometric perspective. Like its predecessor, the game has a large world map that consists of many separate screens, often including dungeon-like locations.