Set in 2023, three years after the events of the first Crysis, the game begins with news footage of a large outbreak of the "Manhattan" virus, a gruesome disease that causes complete cellular breakdown, and panic about an alien invasion by the Ceph, the tentacled, squid-like alien race behind the incident of Crysis. Due to the breakdown in social order within New York City, Manhattan is placed under Martial Law, and under contract from the US Department of Defense, soldiers from Crynet Enforcement & Local Logistics [or simply known as C.E.L.L.], a private military company run by the Crynet corporation, police the chaos.
 
A United States Marine Corps Force Recon unit is deployed into the New York City by submarine to extract former Crynet employee Doctor Nathan Gould, who may have vital information on combating the alien race. However, insertion goes awry, with the Ceph destroying the sub, and Force Recon Marine "Alcatraz" being left as the only apparent survivor. Delta Force officer Laurence "Prophet" Barnes saves Alcatraz, and is distressed with the situation, expecting the squad to support him. Left with no other choice since he himself has been infected by the Manhattan virus, Prophet gives Alcatraz his suit, the futuristic and high-tech Nanosuit 2.0. He then kills himself so that the Nanosuit will stop associating itself with him and be able to assimilate with Alcatraz. Assuming that Alcatraz is Prophet, Gould gets in contact with him and asks him to take the Marines to his laboratory. Prior to the incident, Prophet had been targeted by CELL Commander Dominic Lockhart as an active biohazard due to having been infected with the Manhattan virus, and also in part due to ethical disagreements regarding the side effects of wearing the Nanosuits (with Prophet describing the wearers as "Dead Men Walking" ). Because of this, Alcatraz also faces combat with CELL operatives, who believe that he is Prophet because of his Nanosuit. While on his way to Gould's laboratory, Alcatraz witnesses several CELL helicopters shooting down a Ceph dropship, which crashes not far from his position. Gould asks that he head for the crash site and search for any alien tissue samples. Alcatraz is unsuccessful, and the crash site is attacked by a Ceph soldier. Alcatraz kills it and manages to gather alien tissue from its corpse, which causes some sort of reaction within his Nanosuit. Alcatraz meets up with Gould only to be met with initial hostility when he finds out that he is not Prophet. However, when the suit plays Prophet's last recorded message, Gould relents and informs Alcatraz that because of the reaction to the alien tissue, or "Nano-Catalyst", the Nanosuit's deep layers may contain a solution to stop the Manhattan virus and combat the Ceph. Gould and Alcatraz commit to further scans at a Crynet base on Wall Street, and find out that Alcatraz was mortally wounded when Prophet rescued him, and that the Nanosuit is the only thing keeping Alcatraz alive. The scans are cut short when CELL forces led by Commander Lockhart and Tara Strickland, daughter of U.S. Marine Corps Major Strickland from the first game, ambush Alcatraz and Gould.
 
During the middle of a prisoner transfer outside the building, the Ceph attack the CELL personnel as a massive alien spire rises from underneath the Crynet building, releasing a spore-based bio-weapon that kills most of the CELL troops in the immediate area. Alcatraz is left stranded and isolated for a period of time while dealing with a Nanosuit malfunction brought upon by the spore bio-weapon. The suit gets rebooted remotely by Crynet director Jacob Hargreave, a centenarian who apparently had foreknowledge of the Ceph and spent most of the previous century designing the Nanosuit from stolen Ceph technology as a defense against them. Under Hargreave's orders, Alcatraz enters another one of the alien spires to test whether the Nanosuit's systems can interface with the aliens' technology. The experiment fails, due to the Nanosuit not being powerful enough to ensure the insertion. In the meantime, the US Department of Defense rescinds the authority of CELL over Manhattan and deploys US Marines in their place under the command of Marine Colonel Barclay. They then attempt to drown the aliens out of lower Manhattan by ordering an air strike on the city's flood barrier. Washed away by the resulting wave of water, Alcatraz is later found by Marines, including his Marine comrade Chino, who survived the submarine's destruction. The Marines enlist his aid in evacuating civilians to Grand Central Terminal, the city's primary evacuation point.
 
Hargreave contacts Alcatraz and reveals that the Nanosuit is busy analyzing the alien tissue samples that Alcatraz had previously recovered and is currently rewriting its own code to interface with alien technology. He tells Alcatraz and his marine allies to take a detour to the Hargreave-Rasch building, an office building of Crynet's parent company, Hargreave-Rasch. There, Alcatraz is told to find a stabilizing agent in the bio-lab to facilitate the Nanosuit's analyzing process, but CELL operatives guarding the building under the command of Lockhart still believe that Alcatraz is Prophet, and attempt to kill him. The Hargreave-Rasch complex is attacked by a Ceph "pinger" robot and is completely flooded, washing Alcatraz out of the building and leaving him unable to enter the bio-lab. Seeing that the cause is lost, Hargreave tells Alcatraz to regroup with the marines at Grand Central to help evacuate civilians. At the terminal, Alcatraz is reunited with Gould, who had apparently "escaped" Strickland, leading to the skepticism of Colonel Barclay. Knowing that Strickland is an ex-Navy SEAL, Barclay concludes that Strickland released Gould from captivity. Grand Central Terminal is overrun by Ceph forces, but Alcatraz manages to hold them off long enough for the evacuation trains to depart, and escapes the building's destruction.
 
Due to the hasty and incomplete evacuation from Grand Central, Alcatraz is then tasked with defending a secondary evacuation point at Times Square, when another alien spire rises from the ground. By this time, the Nanosuit had finished processing the alien spores, and Alcatraz manages to enter the spire, allowing his Nanosuit to interface with it and re-purpose the spores to be lethal to the Ceph. This causes a cataclysmic self-destruction of the Ceph in the area, and apparently removes all traces of the biological warfare agent. Alcatraz makes his way to Roosevelt Island to infiltrate a Crynet complex named "The Prism", where Hargreave resides, and manages to kill Lockhart, but is captured by Hargreave, who wants the Nanosuit for himself and attempts to remove the Nanosuit from Alcatraz's body. However, the Nanosuit rejects its removal since it had already completely assimilated with its wearer, revealing memories of Prophet's fallout with Hargreave. Alcatraz is saved by Strickland, who reveals herself to be an undercover CIA operative and ordered Alcatraz's deployment. Alcatraz attempts to capture Hargreave, but Hargreave reveals that he has been in a vegetative state for over a century since an encounter with the Ceph at Tunguska, and that Hargreave's consciousness is only able to communicate and interact through the use of an entirely computerized system. He gives Alcatraz a last Nanosuit upgrade, the "Tunguska Iteration", before the Cephaloids invade the island. Hargreave triggers a countdown timer for the self-destruct system of the complex, and convinces the remaining CELL forces to aid Alcatraz's exfiltration. Alcatraz barely escapes the massive explosion, which destroys much of Roosevelt Island and the Queensboro Bridge. On the shores of Manhattan, Alcatraz meets Gould, Strickland and Chino.
 
Alcatraz is notified by Colonel Barclay that the US Department of Defense has decided to launch a Tactical Nuclear Strike on Manhattan Island, with little regard to collateral damage and nuclear fallout. A massive alien "litho-ship" rises out of the ground beneath Central Park, and lifts much of the park into the air. With the peripheral aid of Gould, Strickland, and Barclay, Alcatraz assaults the floating section of Central Park and succeeds in making his way to the alien spire at its center, which serves as a massive dispersal point for the alien spore. He enters the spire, and his Nanosuit, with the Tunguska Iteration upgrade, is able to repurpose the spire's bio-weapon to turn against the Ceph, killing all Ceph in New York in the process. Alcatraz, while unconscious, communicates with Prophet (whose memories, experiences, and personality had been stored in the suit), who states that, while the mission in New York is a success, they have more work to do, since the Ceph had ancient constructs built all over the world, and were not only limited to New York and the Lingshan Islands. The Nanosuit, before rebooting again, states that assimilation is complete, and Prophet's memories are now "assimilated" into Alcatraz. Upon waking up in Central Park, Alcatraz receives a broadcast from Karl Ernst Rasch, the other founder of Hargreave-Rasch, asking for his name. Climbing out of the crater and speaking for the first time in the game, Alcatraz responds: "They call me Prophet." ...