SH2 starts where SH left off. It is announced that the capture (POW) of Field Marshal Tannenberg will end the war. Since General Plastro has disappeared, it is suggested that he has become a victim of plastrification and been trapped in the real world. The game introduces Bridgette Bleu, a spy for the Blue Nation. She has developed a serum that reverses plastrification. Your job as Sarge and sometimes Vikki is to destroy the serum, eliminate Tan soldiers, and capture Plastro and Tannenburg (and as Sarge you sometimes have to rescue Vikki as she has a knack for getting into trouble.)
The game goes between Sarge's 'realistic' world and our world, in which Sarge is the size of a typical plastic Army Man soldier. It features many interactive effects, such as breakable wine bottles, bustable soda cans and music that spikes in intensity when enemies attack.