As with most fighting games and indeed its predecessor, two characters square off with the goal of depleting the opponent's life bar. As with the original Killer Instinct, when a player's original life bar is fully depleted, s/he will fall to the ground, and immediately begin on their second lifebar.

As with the first game, Killer Instinct 2 relies on an automatic combo subsystem in its matches. The matches, as with Killer Instinct, revolve around a three strength system (Quick, Medium, and Fierce.) However, normal moves have lost a lot of their priority and range, as well as gaining extra recovery time. Throws have been added into the game to deal with blocking characters (as opposed to the top attack in Killer Instinct.) Additionally, characters can be knocked down much easier with normal moves than in the first game, ending the possibility of opening with a 'glitch' combo and also weakening the effectiveness of normal moves. Normal special moves no longer are judged on priority, but instead follow a three tiered 'rock, paper, scissors' system, in which a certain special move will always break another certain special move (similar to the three tiered system in Soul Calibur.) The system has been seen as flawed due to little differences between the special moves themselves [1].

Additionally, a Super bar has been added to the game (similar to Street Fighter Alpha or King of Fighters). This super bar fills as players take damage. After the bar reaches a certain point, the player can use a multi-hit super special move (normally referred to as Super Move,) which is usually an extended version of a normal special move.

The combo system has its roots in the original Killer Instinct. By pressing a certain strength button after an opener move, a player will launch an auto-double and initiate the combo system of the game. However, unlike the first game, players can now open up combos with new and much less risky moves than before (most notable a close Fierce punch or close Fierce kick.) Additionally, Super Moves can be placed into combos, greatly increasing their damage and potency as well as being unbreakable. Additionally combos can be extended using throws, super linkers, manual-doubles, and super end specials.

As a result of the weakened normal moves and other changes to the system, combos have now become more devastating in Killer Instinct 2. In an apparent effort to help ease this dominance, combo breakers are now easier to perform. Unlike combo breakers in the first game, which also required a three tiered 'rock, paper, scissors' system based on strength to break, combos are now broken depending on the type of attack. Punches break kick doubles, and kicks will break punch doubles.

As popular as its predecessor was this next installment, in addition to praise, was criticized for its more liberal combo engine which changed the dynamics of the game considerably. Parry, an advanced new addition, allow an open counter-attack after a successful parry block. A player can assume a defensive position (from either a high or low attack) and cause the attacker to temporarily freeze if the parry is successful. The finishing moves have also been reworked. Now each character can only execute these attacks when the opponent's second life bar flashes red (unlike the first Killer Instinct the opponents falls when he or she loses all of his or her energy bars). Each characters has two Ultimate combo moves (one of them can be executed without executing a combo), the Humiliation sequences were dropped, and the Ultra combo feature is still intact.

List of Characters

• Fulgore: A new, enhanced cyborg created after the first Fulgore was destroyed by Jago in the first tournament. His current goal is the destruction of Jago.
• Jago: Succeeded in destroying Fulgore in the first tournament after being possessed by the Tiger Spirit. He was soon betrayed by the Tiger Spirit which turned out to be the demon Gargos in disguise. Gargos used Jago to gain entrance to the physical world. Jago seeks revenge against Gargos's manipulation.
• Spinal: Spinal was destroyed by Chief Thunder in the first tournament. Gargos however had one of his own in the past. Spinal now fights for vengeance and for his freedom.
• T.J. Combo: After he defeated Riptor in the first tournament, T.J. Combo was sent into the past when attempting to destroy the Ultratech building. Now he simply fights to get home.
• Glacius: The original Glacius defeated Cinder and returned home. A distant relative of Glacius 2,000 years in the past heeds a distress call and comes to Earth. His objective is to find his lost brethren and return home.
• Sabrewulf: Captured by Ultratech in the first tournament after being severely injured and beaten. Has been driven mad by experimentation from Ultratech. With cybernetic arms and being 2,000 years in the past, Sabrewulf desperately seeks a cure for his lycanthropy.
• B. Orchid: Orchid destroyed Eyedol in the first tournament which subsequently sent the Ultratech building two millennia into the past. Now Orchid seeks to destroy Gargos and to find a way home.
• Maya - An Amazonian warrior that previously banished Gargos. Maya was banished by her people when Gargos reappeared. Her goal is to destroy Gargos once and for all to regain her former standing.
• Tusk - A barbarian that seeks to fight all of the challengers before he believes he will have the right to fight and destroy Gargos.
• Kim Wu - An eastern martial artist that is a descendant of the people who previously drove off Eyedol and Gargos. To protect her people, she seeks to destroy Gargos.
• Gargos - A demon lord that has returned to the physical world. Resembles a huge gargoyle that is very powerful and can also breathe fire. He was the rival of Eyedol, the boss of the first game.