A year has passed since the events in Streets of Rage. To celebrate the defeat of the mysterious "Mr X" the prior year; Adam Hunter, Axel Stone and Blaze Fielding met at their favorite nightspot. The next morning, Axel received a phone call from Eddie 'Skate' Hunter, Adam's younger brother. Skate had arrived at home from school to find his house in ruin and his older brother missing. Attached to the front door was a picture of Adam chained to a wall at the feet of Mr. X. The criminals began to retake the streets. Beatings and lootings took place regularly and in broad daylight. Chaos reigned in the city, far worse than before.
- The game was known as "Bare Knuckle 2" in Japan. Check out the arcade in Round 3 - there are Bare Knuckle arcade machines and posters on the wall for "BK2". Also notice the adverts in the Round 4 stadium for "Bare 2".