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Heihachi Mishima, the head of the powerful Mishima Zaibatsu, has been dethroned and defeated by his son Kazuya, backed and possessed by the Devil himself. Under his leadership, the organization has grown even more corrupt, and is involved in illegal animal experiments. An animal rights activist named Jun Kazama is sent to confront Kazuya. Meanwhile, Heihachi is plotting to overthrow his son. In attempt to draw his father out, Kazuya organizes the second King of the Iron Fist tournament.

The follow-up to Tekken is a versus fighting game featuring similar mechanics, with four buttons assigned to left and right punches and kicks. New moves include back throws, chain-throws, and a sidestep unique to Kazuya and Heihachi Mishima. Tackles now inflict damage depending on the distance.