Levels are now larger, more open areas that can often be explored in many directions. There are now hub areas (include a Wang Cave) with shops and characters where primary or optional missions can be started combined with fast travel to start right away. There is once again a linear campaign but with a different approach. Enemies consist of Zilla's minions combined with the demons from the shadow realm. She often appears during missions as they banter. Early on her body becomes corrupted and Master Smith transfers Kamiko's soul to Lo Wang's body. In the previous game the demon Hoji was Lo Wang's companion and this time he ends up with the girl Kamiko, working for Zilla, in his head. During a mission for the Yakuza something goes wrong. Demons, and humans under the command of nemesis Orochi Zilla now live side by side and both are out for his blood. Lo Wang now lives in the wildlands as a hired sword. The game's campaign is set five years after the events of the previous game. The biggest differences are in the amount of weapons and customization options, the open level design and the introduction of online multiplayer for up to four players working cooperatively.

The core 1st-person gameplay is similar to the previous game, offering both close combat melee combat, as with the katana in the previous game, combined with ranged gunplay. As usual he constantly comments on the encounters, dropping oneliners and lending the game a humorous tone combined with over-the-top violence. Consistent across all games in the series Lo Wang is the protagonist, once a corporate shogun and now a mercenary available for hire.

Shadow Warrior 2 is the sequel to the 2013 game Shadow Warrior, which is a reboot of the 1997 title Shadow Warrior.

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