Some years after the Strider Wars, humanity has resumed its expansion into space. On the rough frontier, it falls to the Terran Colonial Authority to maintain peace and order among the outlying colonies and outposts. TCA Marshal John Dalton and the crew of his ship, the Atlantis, patrol this dangerous sector of space when several distress calls lead to the discovery of alien artifacts with unique properties. Soon, the hunt for these artifacts is on between several alien factions as well as human corporations and their mercenary forces, with the TCA and their allies caught in the middle.

The first-person shooter Unreal II, while a sequel to Unreal, has no direct connection to the first game except being set in the same universe (with the Skaarj from Unreal and the Liandri Corporation from Unreal Tournament being major enemy factions). The player controls John Dalton through a dozen missions, taking place in such locations as the dense jungle of a tropical planet, a research facility on a frozen moon, the insides of a planet-sized living organism, the home world of an insectoid machine civilization, as well as a huge starship.

The weapon arsenal consists of more than a dozen guns. Standard types include pistols, an assault rifle, shotgun, and sniper rifle. Some heavier ones are a flame thrower, as well as rocket and grenade launchers, with the grenade launcher being able to use six different ammunition types, including fragmentation, EMP and smoke grenades. Available in later missions are weapons adapted from alien technologies. These include various energy guns, a biological weapon that creates living spiders that attack enemies, and an autonomous floating orb that either seeks out and attacks enemies or circles around the player in point defense. As in other Unreal titles, each weapon has two different firing modes.

Missions are usually of the run-and-gun type, but there are exceptions. Several levels include defense assignments where either a position must be held for a certain time or a character be kept alive. These levels usually include additional tools such as energy barriers and automated turrets that can be placed by the player in any location. Sometimes, AI-controlled characters will be there to help out the player as well. In that case they can be given orders on which sector to defend or patrol, for example.

The story of the game is told through a variety of means: besides in-engine cutscenes, there is a lot of radio chatter during a mission; in fact, it's not unusual for mission objectives to completely change due to story developments. Between missions, Dalton can wander freely about the Atlantis and chat with his crew, going into their personal backstories as well as more details about the main plot.