"A bizarre incident occured in the outskirts of an American suburb called Raccoon City. It was later revealed that the terrible disaster had been caused by the t-virus: a mutagenic toxin created by the international enterprise Umbrella, Incorporated for use in bio-weapon experiments. The Raccoon City Police Department's special S.T.A.R.S. unit immediately began an investigation in the affair. The case was apparently closed thanks to the efforts of S.T.A.R.S. members Chris Redfield and Jill Valentine. But the Umbrella Corporation's experiments were far from finished..."
— Game prologue.
The game is set two months after the events of the first Resident Evil, in the Midwestern American mountain community of Raccoon City. Nearly all of its citizens have been transformed into zombies by an outbreak of the t-Virus, a new type of biological weapon secretly developed by the pharmaceutical company Umbrella. The game's two protagonists are Leon S. Kennedy, a rookie police officer on his first day in the local force, and Claire Redfield, a college student looking for her brother Chris. Having just arrived in the city, Leon and Claire make their way to the Raccoon Police Department, seeking protection from the mutated population. There, they discover that most of the policemen have been killed already, and that Chris has left town to investigate the Umbrella headquarters in Europe. With no remaining motivation to stay, the two protagonists split up to look for other survivors and flee the city. While searching for an escape route, Claire meets a little girl named Sherry, who is on the run from an unknown creature, and Leon encounters Ada Wong, who claims to be looking for her boyfriend John, an Umbrella researcher.
It is revealed that Leon's superior officer, Raccoon City police chief Brian Irons, had been bribed by Umbrella to hide evidence of the company's experiments in the outskirts of the city. He also concealed their development of the new G-virus, an agent capable of mutating a human into the ultimate bioweapon. Irons tries to murder Claire, but is killed by a G-virus mutant in the police department. Thereupon, Claire and Sherry escape through the sewers and become separated. After splitting up with Leon, Ada comes upon Sherry, and picks up a golden pendant the girl loses while running away. Further into the sewers, Ada reluctantly teams up with Leon again, after he insists on his duty to protect her. They encounter a middle-aged woman who fires at Ada, but Leon dives between them and takes a bullet himself. Ada ignores the unconscious Leon and follows the woman, who reveals herself to be Sherry's mother Annette and the wife of William Birkin, the Umbrella scientist who created the G-virus. In an attempt to protect his life's work from special agents sent by the Umbrella headquarters, he injected himself with the virus, which turned him into the malformed creature, "G" and is now chasing Sherry. Annette recognizes her daughter's pendant and attempts to take it from Ada. A fight ensues, during which Annette is thrown over a railing. Ada learns that the golden locket contains a sample of the G-virus, and later – taken over by her emotions – returns to Leon, tending to his bullet wound.
Meanwhile, Claire is reunited with Sherry, and discovers that "G" has implanted his daughter with an embryo to produce offspring. Leon, Ada, Claire and Sherry advance through an abandoned factory connected to Umbrella's secret underground research facility. An attack by "G" leaves Ada heavily wounded, and Leon explores the laboratory to find something to treat her wounds. He is interrupted by Annette, who explains to him that Ada's relationship with John was only a means of getting information about Umbrella: Ada is a spy sent to steal the G-virus for an unknown organization. Just as Annette is about to shoot Leon, a T-103 Tyrant appears and she is forced to retreat. Ada returns to save Leon, and defeats the Tyrant seemingly at the cost of her own life. She confesses her love to Leon, who leaves behind her motionless body. Meanwhile, Annette tries to escape with another sample of the G-virus, but is fatally wounded by her mutated husband. However, before she dies, she tells Claire how to create a vaccine that will stop the mutations caused by the embryo within Sherry. After preparing the cure, Leon and Claire reunite at an emergency escape train, and inject Sherry with the vaccine, which saves her life. "G" – now mutated into a large agglomeration of flesh and teeth – follows them, but is destroyed when a self-destruct system causes the train to explode. After escaping from the city with Sherry, Leon intends to take down Umbrella, while Claire continues to search for her brother. Ada is implied to have survived and to have made away with the G-virus in the pendant. The minigame "The 4th Survivor" depicts the successful G-virus retrieval mission of HUNK, one of the special agents sent by Umbrella. "The Tofu Survivor" and "Extreme Battle" are stand-alone missions that are unconnected to the plot of the game.
↑Capcom Co., Ltd. Resident Evil 2. (Capcom Entertainment, Inc.). (January 21, 1998) Marvin Branagh: About two months ago, there was this incident involving zombies in a mansion located in the outskirts of this city.
↑Resident Evil Archives. BradyGames Publishing. November 9, 2005. p. 247. ISBN 0-7440-0655-4.
↑Resident Evil Archives. BradyGames Publishing. November 9, 2005. p. 253. ISBN 0-7440-0655-4.
↑Capcom Co., Ltd. Resident Evil 2. (Capcom Entertainment, Inc.). (January 21, 1998) Operation report 2: We're down to four people.
↑Capcom Co., Ltd. Resident Evil 2. (Capcom Entertainment, Inc.). (January 21, 1998) Chris's diary: August 24th: With the help of Jill and Barry, I finally obtained information vital to this case. ... We talked it over, and have decided to fly to the main Umbrella HQ in Europe.
↑Capcom Co., Ltd. Resident Evil 2. (Capcom Entertainment, Inc.). (January 21, 1998) Leon S. Kennedy: There's no reason for us to stay any longer than necessary. Let's split up, look for any survivors and get out of here!
↑Capcom Co., Ltd. Resident Evil 2. (Capcom Entertainment, Inc.). (January 21, 1998) Ada Wong: I'm trying to find my boyfriend. His name's John. He was working for a branch office of Umbrella based in Chicago, but he suddenly disappeared six months ago. I heard a rumor that he's here in the city.
↑Capcom Co., Ltd. Resident Evil 2. (Capcom Entertainment, Inc.). (January 21, 1998) Claire Redfield: So it's true, you have been working with Umbrella. Then you must know about the G-virus. What is it? Tell me! Brian Irons: It's the agent that can turn humans into the ultimate bioweapons. Superior to the t-Virus in every way. ... The monster that's been tearing my place apart is yet another product of the G-virus, an ultimate bioweapon.
↑Capcom Co., Ltd. Resident Evil 2. (Capcom Entertainment, Inc.). (January 21, 1998) Annette Birkin: Where did you get that pendant? It looks exactly like the one I gave Sherry. Ada Wong: She dropped it. I've been holding onto it for her. Annette Birkin: Liar! Give it back to me!
↑Capcom Co., Ltd. Biohazard 2 (in Japanese). (Capcom Co., Ltd.). (January 29, 1998) Annette Birkin: あの女はある組織の工作員よ。G-ウィルスを奪うために送られたスパイさ！ ... 研究員のジョンに近づいて、アンブレラの情報を盗み出していたのよ。 / That woman is an agent from the organization. A spy sent here to steal the G-virus! ... She got close to the research member John and began to steal information about Umbrella.
↑Capcom Co., Ltd. Resident Evil 2. (Capcom Entertainment, Inc.). (January 21, 1998) Leon S. Kennedy: It's over. Claire Redfield: No, I have to find my brother.
↑ 15.015.1Resident Evil Archives. BradyGames Publishing. November 9, 2005. pp. 129, 137. ISBN 0-7440-0655-4.