Manhunt 2 does not build upon the story and events of the first game. Instead, the same game mechanics are transferred to a new location, the Dixmor Insane Asylum, where the staff prefers to beat up the patients and experiment on them, rather than to offer treatment for their illness. One day a power outage allows the patients to revolt and bring mayhem to the asylum. The player gets the chance to play two roles: as Dr. Daniel Lamb and Leo Kasper. Although the beginning is set inside the asylum, the action soon moves to other locations.

The game mechanics are largely stealth oriented, while later levels offer more of a regular third-person shooter feel when more firearms become available. Gunplay requires extensive use of cover, maneuvers and sometimes stealth for success. There is a radar system, enemies have different levels of awareness and kills are best performed from the shadows. Players can throw objects to distract enemies or make noises into the USB headset to lure them away from their friends (PS2). To hide in the dark a quick mini-game needs to be performed. If it is not completed in time, the character's location will be revealed at once.

As in the first game players can perform executions, with three styles: Hasty (white), Violent (yellow) and Gruesome (red). These feature explicit violence including strangling, beatings, gun violence, setting them on fire and more. Some of these kills are however censored with blacked out scenes or the camera turning away. In the Wii version player need to mimic the motions needed for a kill with the combination of the Wiimote and the Nunchuk.

All versions are quite similar. The Wii edition includes three exclusive weapons (bottle, mace and a razor), while the other two versions have a weapon not found in the Wii game: a samurai sword. The Wii version is also the only one to include a short tutorial to familiarize the player with the controls. Other small changes in the Wii edition include more detailed environments, additional dialogue, new hunters (Sexual Deviants scene), some changes in weapon placement, a new manhole execution (in Ghosts), and more animations for Daniel and Leo, especially in close combat.