"Fatal Fury 2: The New Battle" is a direct sequel to the original "Fatal Fury" OVA, continuing the story of martial artists Terry Bogard, Andy Bogard, and Joe Higashi as they face new challenges in the world of underground fighting. The narrative begins with the trio returning to South Town after their victory over Geese Howard, only to find the city under the control of a new threat: Wolfgang Krauser, a powerful and ruthless fighter who seeks to dominate the martial arts world. Krauser, a half-brother to Geese, issues a global challenge to the strongest fighters, aiming to prove his supremacy.

Terry, Andy, and Joe are drawn into the conflict as they prepare to confront Krauser in a high-stakes tournament. Along the way, they encounter new allies and adversaries, including Mai Shiranui, a skilled kunoichi with a playful yet determined personality, and Cheng Sinzan, a wealthy and eccentric fighter with his own agenda. The story explores themes of rivalry, honor, and the pursuit of strength, as the characters navigate both personal and external challenges.

The plot builds toward a climactic showdown between Terry and Krauser, highlighting Terry's growth as a fighter and his determination to protect his friends and the city. The narrative maintains a focus on the martial arts battles, with each character showcasing their unique fighting styles and techniques. The series balances action with moments of character development, particularly in Terry's journey as he grapples with the legacy of his past and the responsibilities of his present. The conclusion sets the stage for future conflicts, leaving room for further exploration of the Fatal Fury universe.