Starsiege takes place in the 29th century, portraying the conflict between humanity and the artificially intelligent Cybrid war machines. Played out in various locations throughout the solar system, the story examines both civil unrest in the colonies and an all-or-nothing genocidal invasion by the machines. Bipedal mecha known as HERCs are the mainstay of ground-based combat, and the focus of gameplay.

Humanity is nominally united in an interplanetary Empire, led from Earth by the Immortal Emperor Solomon Petresun. Petresun's policy is the defence of Earth at all costs. While Earth is prosperous and well protected, the colonies on Luna, Mars, and Venus suffer from increasingly harsh regulations and production quotas. The combat units of the Empire are represented by the Imperial Police, Terran Defense Force and the Imperial Knights. The former paramilitary group is responsible for maintaining order in the colonies. The Terran Defense Force are the standard military with bases from Mercury to Titan. The Knights, led by Grand Master Caanon Weathers, are the military's elite and are provided with the best pilots and equipment.

The inequality between the colonies and Earth foments rebellion. In 2802 there are two guerilla movements on Mars, one that concentrates on destroying and capturing Imperial infrastructure and supplies and another bent on killing Imperial personnel and sympathizers. Both groups operate from underground bases and make do with modified mining HERCs and tanks. The rebels partially offset their disadvantages with superior weapons taken from the alien "Tharsis Cache"; an underground stockpile of alien technology discovered by rebels while digging new tunnels. Eventually the rebellion becomes too great for the police to contain and the Knights are deployed to Mars to crush the insurrection.

The Cybrids are a race of sentient robots responsible for the first Earthsiege. They are led by the first Cybrid, Prometheus, who is revered with god-like status. The Cybrids established themselves in the outer solar system after being defeated two centuries before during the first Earthsiege. Since then they have built up their strength for another bid to destroy humanity and claim Earth for their own. Like the Martian rebels, the Cybrids discover their own cache of alien weapons and adapt it to use, but their cache is inferior to the Tharsis Cache.

The game offers two story campaigns, with different endings. The Human campaign puts the player in control of a Martian rebel, initially fighting the Empire before humanity unites against the Cybrid invasion midway through the campaign. The human campaign culminates in an attack on Prometheus on Pluto. The Cybrid campaign starts with their invasion across the outer colonies and proceeds to Earth, ending in an assault on the Imperial palace to kill Petresun.