The game has a branching storyline with different endings, and the player's decisions can lead Kyle to the light as well as the dark side (for example, killing innocents will add 'dark points' to Kyle's score). Completing levels rewards the player with stars, which can be allocated to enhance the powers.

There are fourteen Force powers altogether if the player chooses to develop only one type of powers throughout the game, a bonus power can be gained. Light powers are mostly used for healing purposes dark powers involve violent actions such as choking enemies or hurling objects at them neutral powers enhance Kyle's speed and jumping ability. There are three kinds of Force powers Kyle may use in the game: light, dark and neutral. Kyle can use blasters and rifles to take care of his enemies, and later in the game he will also be able to fight enemies with a lightsaber.

Primarily a first-person 3D shooter, the game also allows the player to switch to third-person perspective. The game is set in the Star Wars universe and its events occur after those depicted in the movie Return of the Jedi (Episode VI). Star Wars: Jedi Knight - Dark Forces II is a sequel to Dark Forces. Will Kyle be able to stop Jerec and become a true Jedi without falling to the dark side? The evil Sith lord Jerec, who was responsible for the death of Kyle's father, is on a quest of his own, searching a mythical place called Valley of the Jedi, where his dark powers could be unleashed. Kyle Katarn, a former mercenary and now an ally of the rebels, discovers that he is in fact a Jedi, and is on a quest to find his lightsaber and learn the techniques of the Force.

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