After the complete destruction of the Mad Gear Gang in the previous game, the power vacuum of Metro City's criminal underworld, which was left behind by Mad Gear after its final downfall, had caused the other local street gangs of Metro City to fight and battle against each other and one another for both total dominance and supremacy. Eventually, the Skull Cross Gang, who were once a subordinate sub-group of Mad Gear had won and defeated the other local street gangs so that they could then establish themselves as the new dominant criminal organization of Metro City, wasting no time in planning and making their own criminal activities to seize and obtain total control of the city.
Several months later, Mayor Mike Haggar was in his office speaking with his old friend Guy when an unexpected explosion had suddenly and shockingly rocked Metro City. Detective Lucia Morgan of the Special Crimes Unit rushed in and informed Haggar that a huge riot had broken out in the center of town. Before Haggar, Guy, and Lucia could make their next move in having to face and handle the impromptu situation at hand, an unknown stranger had suddenly appeared before the trio, offering his assistance and saying that he knew what was going on at the moment. Haggar, pressed for time, accepted the stranger's help, but threatened to grind him into dust if it was a trap.
The quartet headed to the Police Station where a breakout had just occurred in lockup. Following the trail, they were attacked by Dave, a corrupt cop in the employ of the Skull Cross Gang. They defeated him, but he had delayed them long enough for the rest to make their getaway. The quartet soon realizes that the entire riot had been staged as a smokescreen for the gang to break out one of their leaders from jail. With time no longer an issue, the unknown stranger soon introduces himself as Dean and explained that he had been just another street fighter until he had refused to join Skull Cross, whereupon they had slaughtered his entire family as a cruel act of malicious punishment towards him and that Dean himself now seeks revenge in wanting to fight and destroy Skull Cross so that he can avenge the death of his family.
From there, Haggar, Guy, Dean, and Lucia work together in having to fight and battle against both the members and ringleaders of the Skull Cross Gang throughout most of Metro City, all leading up to a final fight at Skull Cross HQ where, at the the helipad on the roof, the quartet had faced off against Black, the leader and founder of Skull Cross. After a tough and intense fight, Black was knocked back into a high-voltage transformer, killing him instantly and setting off a chain reaction that eventually blew up the entire building. Haggar, Guy, Dean, and Lucia had managed to escape the building's destruction however and mused on how it would be Haggar's job to help rebuild the city via his official position as mayor. Dean, who had succeeded in avenging his family's death via the complete destruction of the Skull Cross Gang, had said his own goodbyes to Haggar, Guy, and Lucia as he had soon departed on a personal journey, determined to move on and forward in his life while Haggar, Guy, and Lucia watch as the sun soon rises over Metro City, signaling and indicating the fact that the adventure is now over and that things in Metro City will truly and undoubtedly return back to normal in no time at all.
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