A mid-western town in the United States called Raccoon City was destroyed when a mutagenic viral weapon known as the T-Virus was leaked into the Arklay Mountains in May of 1998, followed by the release of the T-Virus and G-Virus into the sewers of Raccoon City in September of the same year. The resulting incident forced the United States government to destroy Raccoon City via surgical missile strike after most of the population was infected with the leaked viral strains, becoming homicidal monsters. Although the Umbrella Corporation was implicated in the incident and severely pressured by outside influences to confess their crimes and abort their research, they refused to do so, conducting further research into the strains in clandestine, secluded laboratories. When a large amount of a recently developed hybrid viral agent, known as the T/G-Virus, is stolen from Umbrella's Paris lab facility by a former Umbrella researcher then released onboard an Umbrella-owned luxury cruise ship, Bruce McGivern is sent in by the U.S. government to retrieve the virus and neutralise the threat.

This game begins onboard the Umbrella-owned luxury ocean liner, the "Spencer Rain," (named after the founder of Umbrella Corporation Ozwell E. Spencer) which has been infected with the experimental T/G-Virus stolen by former researcher Morpheus Duvall. The player assumes control of Bruce McGivern, a member of the Anti-Umbrella Pursuit Investigation Team, a U.S. government task force devoted to investigating and preventing the illegal activities of the Umbrella Corporation. Unlike the previous two Gun Survivor titles, this game features navigation from a third-person perspective as the player moves the character around to explore the environment and avoid encroaching threats. Combat is still undertaken in first-person view, with the player depressing a button on the controller and subsequently switching to said perspective.

The story also features Fong Ling, a Chinese agent for the Ministry of State Security, a Chinese intelligence agency. She built a reputation within the intelligence community when she was ordered to hunt down and arrest her brother, a fierce anti-communist and pro-democracy activist. Her brother was later executed by her superiors.

Ling is ordered to infiltrate the hijacked vessel in the Atlantic Ocean in order to eliminate Morpheus and obtain the T/G-Virus. Initially apathetic towards the presence of a rival operative, Ling must ultimately utilise Bruce's combat prowess in order to survive their precarious situation.