This sequel to the original Fallout is set in a post-apocalyptic era many decades after a nuclear war broke out and eliminated most of the world as we know it. America is turned into the Wasteland, a grim world full of ugly ghouls, powerful super mutants, mad robots and raiders, and various factions fighting for power. There are also many pre-war Vaults, some of which allowed their inhabitants to survive the war. The game uses an isometric view like most 1990s RPGs did, and the battles are turn-based.

You play as a Chosen One, a distant descendant of the original Vault Dweller, living in the village called Arroyo. The Chosen One is tasked by the village's elders to retrieve Garden of Eden Creation Kit, a gadget that can transform the wasteland into a fertile environment. Before you start, you can customize your Chosen One and assign him with various skills, perks and traits using the system called S.P.E.C.I.A.L. Your actions and choices affect both your karma, which defines how "good" your character is overall and your reputation that may vary from settlement to settlement.