Soul Reaver 2 is set in Nosgoth, a fictional land with fantasy aspects. In the first game in the series, Blood Omen: Legacy of Kain, the vampire Kain embarks on a journey to restore the Pillars of Nosgoth—nine supernatural edifices which are inextricably tied to the health of the land, but become corrupted. During his adventure, Moebius, a manipulative sorcerer, tricks Kain into orchestrating the destruction of the vampire race: Kain is left the last surviving vampire in Nosgoth. After restoring eight of the Pillars, Kain discovers that he would need to sacrifice his own life to restore the final corrupt one. Realizing that his death would ensure the annihilation of his species, he refuses to kill himself. This triggers the Pillars' collapse, and dooms the world to eternal decay, but enables Kain to live on and revive the vampire race.
By the time of Soul Reaver, 1500 years later, Kain is a despotic emperor, his vampires dominate the land, and Nosgoth hinges on the brink of collapse. The Elder God, a demiurge-like entity, lurks beneath Nosgoth and controls the cycle of reincarnation; the vampires, whose biological immortality opposes his doctrine, are his enemies. In Soul Reaver, Raziel—Kain's lieutenant—is executed by Kain, but The Elder God resurrects him and encourages him to exact revenge. Traversing the wasteland and murdering the vampires, Raziel confronts Kain, who attacks him with the Soul Reaver sword, imbued with a spirit which absorbs its victims' souls. The Soul Reaver shatters when it strikes Raziel, and the blade's spirit binds itself to his arm. His motives still mysterious, Kain lures Raziel through a time portal into Nosgoth's past.
In Soul Reaver 2, it is established that, in Nosgoth, fatalism is an actuality—history is immutable, and all individuals are subject to predestination. Raziel, due to his paradoxical destiny, is the only exception to this rule—his presence enables temporal paradoxes to be triggered, altering history for better or worse. Kain relies on Raziel's free will in a bid to outsmart Moebius and resolve the dilemma he faced in Blood Omen, ultimately hoping to enable both the restored Pillars and the vampire race to co-exist in the future. Soul Reaver 2 opens as Raziel emerges from the time slip and is greeted by Moebius, having arrived in an era 30 years prior to the events of Blood Omen. Two further time periods, 100 years after and 500 years before Blood Omen respectively, are also explored as the story progresses.