The game takes place in New York City.
The gameplay is expanded from the original game, which was primarily a wrestling game. Fighters can choose three of five fighting styles.
The game emphasizes strikes more, as well as proper use of the arena's environment and the surrounding crowd. Tossing the opponent against barriers gives fighters the opportunity to inflict massive damage to their opponent by tossing or slamming them into the wall headfirst, or using other features of the environment, such as slamming a door or gate in their face.
The crowd will shove a fighter back into combat if he is thrown into them or gets too close, and will sometimes hold a fighter, leaving them open to attack. Some spectators carry weapons, and will offer them to a fighter with enough momentum, or even attack a fighter if the guy next to them holds him.
Momentum is gained by successfully performing moves, countering, and taunting the opponent. The rate at which momentum is gained is effected by the fighter's Charisma, which is set for most fighters. Created fighters can set their own charisma with a combination of clothes,tattoos and jewelry; the more expensive, the better. A fighter with a good set of clothes, extensive tattoos, or laden with jewelry can often fill their momentum meter in just a few moves.
When the momentum meter is full, a fighter can activate it, which results in a Blazin' Taunt. In this state, the fighter is said to be Blazin', and can pull off a Blazin' Move, a powerful and brutal attack personalized for each character. A created character can learn every single Blazin' Move in the game, but can only have up to four usable at any one time.
With the focus taken from mixed martial arts, the only way to win a fight is through Knock Out or Submission. A character can be made to submit by putting them into submission holds until the health bar of a single body part is depleted.
Follows the narrative of a unknowncreated character fighting his way through the New York Underground. Winning matches rewards the player with cash, which can be used in different shops to buy clothes, haircuts, tattoos, and jewelry, as well as Development points, which can be used at the local gym, run by Henry Rollins, to increase the character's skills, or to purchase and set up new Blazin' Moves and up to two additional fighting styles.
Winning matches also unlocks the fighters defeated, as well as their Blazin' Move, and often the jewelry they may wear. Created characters can have the jewelry of Sean Paul,Crack, Xzibit,Crazy Legs,Lil' Flip,Def Jam Records,Roc-a-fella Records,State Property, and many others (except for some particular signature pieces such as the medallions worn by Flava Flav or Modify it like Ghostface Killah's Sun God Plate Gold and Diamond piece.), the fighters may be used in Battle Mode, while their moves and jewelry may be purchased and used by the player
The game's story picks up immediately after the first game (Def Jam Vendetta). D-Mob, the underground boss from the first game, has just been arrested, when the car transporting him gets broadsided by a SUV. The SUV's driver rescues D-Mob from police custody and drives off.
Unlike the four pre-set characters from the first game, the player is allowed to create his own character, in a sequence where the cops who lost D-Mob are asked to describe the player to a police sketch artist. The player can also choose between several voice types as well, unlike the previous heroes, who never spoke in the game. The voice selection is not available in the GameCube version of the game.
At first, the action will center around shoring up D-Mob's suddenly shaky empire, which has been rocked by the events of the first game, D-Mob's near arrest, and the ruthless Crow, who uses this period of uncertainty to try to take over D-Mob's turf. The fights take place in "clubs." When a fighter for either side manages to either fight off all comers in a club, or simply a captain holding it, or both, he is said to have taken it for his side, and control changes to that side. In the very beginning, the player will be fighting other fighters in D-Mob's group as he gets started, then will quickly be called upon after a few victories to defend clubs that are under attack from fighters that Crow is sending to try to take them, and later go on the offensive to attempt to take clubs from Crow.
The player will also need to fight for respect in D-Mob's crew. Many of D-Mob's lieutenants and top fighters will doubt or be disdainful of the player's skills and abilities at first, most notably Sticky Fingaz, who begins as D-Mob's top fighter until the player begins to replace him, and slightly less vocally by others like Ludacris. Fortunately, the player is quickly befriended by and taken under the wing of Blaze, who is not only one of D-Mob's top lieutenants but also a major advisor to the underground boss.
The player can also gain a girlfriend after fighting for her; he can get the girlfriend he wanted, or if he loses, an uglier one, and later, she ends up in a Catfight with Carmen Electra over him. The player can then choose to keep his current girl, or switch to Electra.
Soon after, D-Mob arranges a match against the legendary Ice-T for the player to prove himself to the rest of his crew. Afterwards Crow himself crashes the party and openly announces his intentions to take over D-Mob's turf, and begins offering top dollar for D-Mob's fighters to switch to his side. With Crow seemingly having an edge in both money and the sheer number of fighters, the situation looks grim and many of D-Mob's men, such as WC, desert him after this incident.
After this the war heats up, but even though the odds seem to be against D-Mob's group, the rise of the player through the ranks, and his ability not only to capture clubs from Crow but also from third party groups, such as the Triad-run Dragon House or the Babylon, run by a Jamaican mob in Brooklyn, begins to offset Crow's advantages in cash and fighters.D-Mob sends Blaze to fight Crack,but eventually loses to him.
Eventually, Crow proposes a winner-take-all Cage Match between Crack, one of Crow's best and most feared fighters, and D-Mob's "best man".
D-Mob, with encouragement from Sticky, accepts this deal,only to infuriate Sticky when he picks the player as his representative. Sticky storms off angrily, but D-Mob encourages the player not to worry about it and keep his mind on the fight. The player wins the cage match against Crack right in the heart of Crow's territory, but as he, Blaze, and D-Mob are celebrating in their limo, a car drives alongside, and gunfire erupts from the window. D-Mob and Blaze are injured, and Sticky, who participated in the attack, is revealed to have joined up with Crow. After a Subway Match against Crow's enforcer and gunman Trejo, the player returns to the limo, where a wounded D-Mob orders him and Blaze to escape from the rapidly-approaching police (Trejo does not appear again, and can be presumed dead because the player has the option to throw Trejo in the path of an oncoming subway train, killing him).
D-Mob is arrested, and Blaze takes over in his stead, using the player and Blaze's friend Doc to take all of Crow's clubs in retaliation. During this time, the player fights in a team tournament, and must choose between two fighters whose respect he earned early in his career: Ice-T and Omar Epps. The player chooses one of them and eventually fights the team of the other person not chosen and Magic. The prizes consist of a large cash prize for one team member, and a customized black Cadillac Escalade for the other (which the player takes).
As the player continues to rack up victiories and chips away at Crow's empire, Crow continually tries to get the player to join his side, but fails (One of the first attempts consists of Magic threatening the player in a parking lot after a cage fight with Lil' Flip - this results in the game's only Demolition Match). Finally, Crow resorts to kidnapping the player's girlfriend and forcing him to retake all the clubs he has earned for D-Mob's side, one by one, an apparent betrayal that angers the rest of D-Mob's crew. Crow warns the player that if he tells anyone the real reason for his change of sides, Crow will kill the player's girlfriend.
With the last club won in a fight against Doc (before which a distraught Blaze angrily takes D-Mob's pendant from the player), Crow claims to have one final task for the player. The scene is moved to an empty scrapyard, where the player finds Blaze brutally beaten by Magic, the final task being to finish him off. The player refuses, and knocks out WC. He and Blaze then battle Crack and Magic.
After the fight, the player figures out where his girlfriend is being held, and that Crow never planned on letting her live. He and Blaze rush over to an abandoned factory, where Sticky is about to set the entire building on fire. The player engages Sticky in an Inferno Match and leaves him to die in the burning building. After he wins the fight, he can be seen taking his girlfriend out of the burning building before it collapses. She remains unconscious as the player tries to shake her awake (leaving her true fate undetermined), and enrages the player to confront Crow.
The player and Blaze confront Crow at his headquarters, backed up by Crack and WC, whose respect they earned, and the rest of D-Mob's crew, whom Blaze had cleared the player's good name with. As a rumble breaks out with Crow's gang, the player rushes to face Crow in a final showdown. After a brief stand off involving a gun, given to the player by a repentant Magic, the player decides that Crow is not worth killing. However, an enraged Crow attacks him with a knife hidden in his cane. After a Window Match, Crow is thrown through the window and to his apparent death. The player then takes a minute to reflect after Crow is finished,Blaze gives the player back D-Mob's Pendant for restoring order to the code and they escape as the police arrive.
Battle Mode is the versus mode of the game, allowing up to four players to fight at once. It has several sub-modes:
- One on One - A single match between two fighters.
- Team Match - A two on two brawl that ends only when both fighters on a team are knocked out or submitted.
- Free for All - A match between three or four fighters, where it's every fighter for themselves.
- Cage Match - No crowd interference, but the cage itself can be used to attack the opponent.
- Ring Out Match - The wooden barriers lining the ring can eventually be broken, and the match can be won by throwing the opponent through the resulting gap, or by a typical knock out.
- Inferno Match - A battle in a burning building. Contact with the ring of fire damages fighters immediately. In addition, bits of flaming debris will sometimes fall from the ceiling, which can be used as weapons.
- Demolition Match - Two SUVs form part of the arena, and fighters can use each other to mess them up. The match can end by totaling the opponent's car. To total the opponent's car smash them into two different sections of the car 3 times (Player 1 - Black Cadillac Escalade) (Player 2/CPU - Silver/Gray Hummer H1).
- Subway Match - Fight in a Subway terminal. At regular intervals, a train will roll past. Fighters can be thrown or knocked off the platform, and into the path of the train. Naturally, throwing an opponent into the path of a moving train takes them out of the fight immediately, no matter how much health they have. If both fighters get hit by the train it will result in a double KO.
- Window Match - Three large windows line one side of the arena, and a four-story drop awaits the person slammed through one of them. No matter which window they get smashed through, in the cutscene that follows they can be seen being smashed through the middle window.