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Max Payne was a police officer of the New York City police. On one terrible day, his wife and newborn daughter were killed by three junkies, who broke into his apartment after having ingested a new designer drug known as Valkyr. After the tragedy, Max quit the police force and joined the Drug Enforcement Administration. Three years later, during a raid on a mafia compound that was reportedly trafficking Valkyr, his best friend and fellow DEA agent Alex is killed, and he becomes the prime suspect in his murder. Now Max is all alone in the cold, snowy night of New York. The mob is out to get him. The police are out to get him. The only way out is with guns blazing, because he has nothing to lose.

Max Payne is a third person shooter stylistically influenced by film noir, "hardboiled" detective stories, and Hong-Kong action cinema. Max can perform rolls and leaps to try and dodge enemy fire. The weapons at his disposal range from baseball bats to Ingram sub-machine guns, grenades, Molotov cocktails, and others. A unique feature of the game is the usage of the so-called Bullet Time - a time-slowing ability that was popularized by the first Matrix movie. Activating the Bullet Time slows down everything that happens around Max (including his own movements), allowing for slow, but precise performance of moves to take care of his enemies. A special meter indicates how much time the effect will last, and how long Max needs to wait until it can be activated again.

Cutscenes in the game are presented as comic book-style graphical panels accompanied by voice-overs.