The game takes place in December 2634, a year after the events of the original Contra. A disturbing distress signal from General Hal is received, who was on his way to South America in preparation for the GX Army's 7th military maneuvers, reporting that the GX Army has suddenly revolted. The top branch of the federation forces calls forth Bill and Lance to investigate the situation. They arrive at the base ruins, only to find out that the GX Army's troops were being possessed by the same kind of mutated creatures they fought at Galuga (in the original Contra). Thus, the situation becomes grimmer taking into account the fact that Bill and Lance are killing their former comrades-in-arms.

As in the original Contra, the North American localization of the NES version changed the game's futuristic setting to a contemporary one, although the premise of Bill and Lance fighting against their former comrades-in-arms remained more or less the same.