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X-Men 2 does not have any recognizable ties to the story of the original game, save for some characters that were present in the first game as well. In the game, a techno-organic race of aliens named the Phalanx invade (or according to the game manual, return) to Earth in order to take control of its inhabitants by assimilation. Most of the X-Men have been captured, except for Wolverine, Cyclops, Nightcrawler, The Beast, Psylocke, and Gambit, who have avoided capture and are trying to rescue both the other X-men and save the world. Along the way, the X-Men rescue their old arch-nemesis, Magneto, and, in a surprising turn of events, he joins them in their quest to defend the world from the Phalanx aggression.
Initially, the player can play as any one of the six aforementioned X-Men. The game does not allow the player to select a character at the beginning, but rather thrusts the player in with a randomly selected character. Each character can jump, attack, and use their respective mutant power. Some characters, like Wolverine and Psylocke, can double-jump, while others, such as Cyclops, can charge up their power for an even more devastating version. Unlike the previous game, there is no set meter for the mutant power, allowing the player to instead use it as much as they like. If the player's character remains at full health, they become stronger than normal, and their mutant power reflects their additional level of strength. The six playable X-Men in the game are:
- Beast - Most of his attacks are all physical strength. When he has 9 or 10 bars of health, his special attack allows him to send shock waves to the to his surroundings as he slams the ground.
- Psylocke - Her special attack is using her arm to shock people. Once you get full health the range to shock people is slightly longer.
- Gambit - Gambit's special attack allows him to fire a kinetic card at an enemy. He can shoot 2 or 3 if the player charges the attack by holding down the button, or if he has full health.
- Cyclops - His special is shooting laser out of his eyes, and if the player holds the special button down or has full health he will shoot a laser with a wider range.
- Wolverine - Uses his adamantium claws to tear up foes, which can inflict bonus damage when at full health. Wolverine also has some minor health regeneration abilities when not in combat and is able to climb walls using his claws.
- Nightcrawler - His mutant ability is teleporting and appearing somewhere else on screen depending on the direction you press the d-pad, the distance of his teleport can be increased by holding the mutant power button down longer. With full health or by charging the attack by holding down the button, Nightcrawler can damage enemies that are in the immediate vicinity of his teleportation. and is able to scale walls.
- Magneto (Becomes available after defeating him in level 3) - Magneto can shoot electromagnetic balls, and also has the ability to levitate.
- In the original Genesis release, there was a minor glitch in some copies of the game that made the player start with Beast on the first level, rather than choosing a character at random.
- The game's soundtrack was composed by Kurt Harland, of the electronica band Information Society. Some levels featured different soundtrack elements depending on the character selected although the basic structure of the level's musical theme remained the same.
- The European release of the game re-used the cover art from a game gear X-Men game, X-Men 2: Game Master's Legacy.