The game's use of third-person perspective when using a melee weapon affords the player greater control in combat.
Unreal Championship 2 features 14 different characters from the Unreal universe, plus extra characters released in a bonus pack via Xbox Live. Other additions include the new gametypes Overdose and Nali Slaughter, new weapons including melee weapons, and more adrenaline combos than in previous games.
Unreal Championship 2 adds melee combat to the series by allowing characters to switch to their respective weapon, such as a blade or staff. Players can also perform special "Fatality" moves very much like Mortal Kombat, another game series by Midway. Players can use melee weapons only in third-person mode, but can switch between first- and third-person mode on the fly while using firearms.
Before a multiplayer game starts, the host can change gravity, regenerate health, and otherwise modify gameplay with "mutators" as is common in the Unreal series of games. The game also features, in addition to the classic multiplayer, a single-player story with cut scenes, story-specific missions, and tournament ladders for each character in the game.
Unreal Championship 2 began development after Unreal Tournament 2003 was released and a planned sequel was in the works for the PC. Epic Games decided to move the game over to the consoles and became a three game contract between Midway Games and Epic Games. It was marketed as a sequel to Unreal Championship even though the original has almost nothing to do with the game itself.