The game revolves around The King of Fighters, an elite fighting tournament. The tournament at the center of the game is sponsored by an unknown patron, whose identity becomes a matter of public interest in the country. The narrative is divided when the player faces a single fighter named Kusanagi, a clone of the returning warrior Kyo Kusanagi. From one path, following Kusanagi's defeat, the player faces a young man named Adelheid who is accompanied by his sister Rose. Once Adelheid is defeated, Rose threatens the winner with locking him in the area. In other alternative road, it is revealed that Kusanagi was created by Chizuru Kagura as an attempt to test the winner. Chizuru and her undead sister Maki challenge the player to a boss fight. Following the Kagura sisters' defeat, a woman named Botan reveals herself as the true mastermind behind the 2003 tournament, having brainwashed Chizuru. Botan's partner, Mukai, becomes the final boss and despite being defeated, claims success for his superior, having weakened the seal of the ancient demon Orochi.

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