Mio and Mayu, who are identical twin sisters, are on a trip to a holiday site from their youth when they become separated in a dense forest. When they enter the Lost Village, a place that disappeared from the world of the living many years ago, the path that they came in on disappears behind them. Intent on finishing a sinister ceremony that has been left incomplete for a very long time, the ghosts of the town’s inhabitants roam the streets looking for the twins. As Mayu’s relationship with Mio continues to deteriorate, Mio notices that Mayu is acting more and more as though she were someone completely different. Mio stumbles across the Camera Obscura by happenstance, and using the abilities it bestows upon her, she seeks for a method to get her sister and herself out of the community.
The gameplay of Fatal Frame II is largely identical to that of the first installment in the series, albeit with a few minor adjustments. It is no longer necessary for the camera to charge up a shot before it can be taken; nonetheless, different film types now have loading delays, which can render Mio defenseless if she takes a picture at an inopportune moment. It is no longer necessary to use a disposable item in order to charge the special skills of the camera; instead, these abilities can be charged by snapping effective pictures of ghosts that are attacking. It is still possible to upgrade and unlock the camera’s unique skills and stats with spirit points; however, in order to upgrade each level of a stat, it is necessary to first find and then spend an item.