The game begins with a cold open; the first level begins as soon as the game is turned on with a random character (depending on the direction the player pressed on the controller's D-Pad). After completing the first stage, the title screen and credits roll and the player is given the option to switch characters.

Each character has a "mutant power attack" which can be used in combat. Unlike the preceding game, there is no energy bar that limits the amount of mutant power attacks a player can use. Some of the mutant attacks can be charged to a greater effect by holding down the power button. The attacks increase in power when the character has nine or ten bars of health and can perform different functions if the character is in the air.

In addition to these powers, each character has various lesser skills, manoeuvers and quirks which make gameplay a different experience with each (see above). These powers can be used to reach hidden health pickups (which take the form of a double helix) or as a shortcut. Players begin the game with eight lives (meaning nine attempts) that are shared by all characters, with no way to gain more.

The game is based on the current story arc from the comics at the time of release. The technorganic alien race known as the Phalanx have returned and are seeking to take control of Earth by assimilating all of its inhabitants. They have also captured and cloned several mutants for experimentation. Only a select group of X-Men (Beast, Psylocke, Gambit, Nightcrawler, Wolverine, Cyclops) have avoided capture and, temporarily united with their oldest foe, Magneto, they must defeat the Phalanx before all of humanity is assimilated. Along the way, they will travel through familiar landscapes including the Savage Land and Avalon, and battle powerful adversaries such as Apocalypse, the Sentinels, Exodus, Deathbird and more.