Dead Rising 2 starts several years after the original Dead Rising finished: the experimental virus that turns living beings into the undead has spread beyond Willamette and infested most of the United States. When the crisis became serious, a synthetic drug called "Zombrex" which delays the zombification was released by the pharmaceutical company Phenotrans and sold out quickly.

The player takes control of Chuck Greene, a former national motocross champion fleeing along with his daughter Katey to Fortune City, rebuilt from the remains of old Las Vegas and yet untouched by the zombie disease. Katey was bitten by her zombified mother and thus needs a shot of Zombrex every 24 hours to avoid zombification. In order to get his hands on more Zombrex - or at least the money to buy some - Chuck is desperate enough to enter a game show called "Terror Is Reality" where he has to slay the undead for entertainment. Right after the show, some of his "victims" break loose into the city, causing a wide-scale infection. Chuck learns from a news report that he is accused of causing the outbreak and that the military will come to capture him and to purge the city in three days.

Like in the first Dead Rising, the bulk of the game takes place over 72 hours, but once the player has cleared the Story Mode with the true ending, which requires completing all "case files" (plot-related missions), Overtime Mode will be unlocked, extending the main plot by adding extra time and objectives. During the initial 72 hours, Chuck must get Katey more Zombrex, find a way to escape Fortune City and clear his name, whilst making sure he and Katey survive.

Gameplay takes place in a sandbox-like environment. The player can freely move around in zombie-infested Fortune City and choose how they want the game to progress by either taking on missions (plot-related and side missions, the latter mostly involving saving survivors from zombies) or ignoring them. The player can ignore the main story altogether, letting all survivors die, and just fight the undead roaming the streets or go exploring. This will not result in a "game over" screen, but in a different ending. If the player fails to get Katey a shot of Zombrex every 24 hours, the game won't end either (unlike in Dead Rising 2: Case 0).

Zombrex can be found on various occasions around the city or bought off traders looking to make a fortune off the zombie outbreak. For rescuing survivors, defeating psychopaths (survivors hostile to Chuck) and chopping zombies, Chuck earns experience points (called "Prestige Points" like in the first game) used for leveling up and gaining more strength, a larger inventory or new abilities (like faster movement or additional combat techniques) in the process.

The first game was especially known for its extravagant ways of killing zombies. Most of the environment could be used to defend oneself, from regular pistols and shotguns to all kinds of gardening equipment, food (throwing soda cans on zombies) or plastic light sabers that glow in the dark from a kid's toy store; nothing seemed too funky for the developers at Capcom. The new developers of Dead Rising 2, Blue Castle Games, held onto that tradition and introduced a new combat element: the work bench. Chuck is now able to build his own custom weapons by using stuff he finds throughout the city. The player may just mess around to find out how to build a certain custom weapon or collect special blueprints to craft them, called "combo cards". These can be unlocked by leveling up, doing side missions or progressing in the main plot. Custom weapons inflict much more damage then regular ones and Chuck gains more experience out of every killed enemy.

If Xbox 360 owners have a save file from Dead Rising 2: Case 0, they can import their level, abilities and unlocked combo cards into the Xbox 360 version of Dead Rising 2.