The game begins with the universe over-run with evil, with The Master battling with Tanzra. Tanzra, once The Master's servant, led a rebellion against The Master, but lost and was banished from Heaven.

Ripped and torn, the slain body of Tanzra fell to the underworld. Feeding on the intense hatred each held for The Master, Tanzra's seven deadly sins and their minions combined their power to raise the spirit of their mighty leader. Tanzra, now vowing revenge for his defeat by The Master, unleashed these demons upon the world. The player in this game assumes the role of The Master, aided by an angel associate known as Crystalis.

Some of the stages in the game are meant to be ironic regarding the blighting nature of Tanzra's demons. The townsmen in the city of Leon are sent to the underground prison of Gratis for not paying their taxes by a newly appointed king named Kolunikus who is afflicted by Greed. The final staged level of the game pits the player against a mechanically engineered god in the city of Humbleton, a battle of Pride (a satire on the Biblical story of the Tower of Babel).

After the player slays the first six deadly sins, the Tower of Babel appears in which you fight the final sin, Pride. You then descend into Hell where you again fight the seven sins again as well as Tanzra himself, a beast frozen waist-deep in a lake of ice (just as Satan was in the Inferno in The Divine Comedy).

During the game's credits it is declared that "The Master will live forever", followed by an image of the statue of The Master slowly eroding over time. The statue's sword and right wing fall off, suggesting the growth of civilization and the increase of mankind's self-sufficiency. This reflects the ending of the original ActRaiser, where the servant speculates that someday the world may be so independent that it will forget about the Master.