Oddworld: Stranger's Wrath is set in the fictional Oddworld universe, differing in many ways from the preceding installment. The game incorporates two basic genres: third-person platforming action and first-person shooter. The player can switch between the modes at any time by using a melee or a ranged weapon, respectively. The goal of the game, for the most part, is to bag the outlaws and bring them in, collecting "moolah" (the game's currency) in the process. The Stranger can stun or knock down enemies, as well as use a stealthy approach, e.g. hiding in long grass to surprise the enemy.

A bounty hunter known only as the Stranger is pursuing and capturing various criminals, trying to earn enough money for a mysterious operation. When he hears that a town populated by Grubbs has been invaded by a demon, the Stranger ventures there. The town was once protected by a race of creatures known as the Steef, who now appear to be completely extinct. The Stranger soon discovers that a nearby river has been dried up by a dam, built by a person called Sekto. The Stranger must confront this person as he continues to hunt down outlaws, revealing nothing about his past.