The game is set in the distant future of 2114, 42 years after the events of the original System Shock. We are onboard the spaceship Von Braun that returns from humanity's first interstellar expedition to Tau Ceti system. The plot follows the main character who awakens from the cryosleep, with no idea what's going on. The rest of the crew was affected by some disaster that either killed them or turned into brainwashed slaves of an alien entity called The Many. The only other survivor is presumed to be mysterious Dr. Janice Polito, who instructs the player via radio. To survive and find out what happened, the protagonist sets out to explore the dimly lit corridors of Von Braun, encountering his former friends mutated into abominations. The player can use guns, but ammunition is scarce, which forces the player to use it prudently and move ahead with caution.

The game was created by Ken Levine, the Irrational Games founder and famous designer behind such titles as BioShock and Thief: The Dark Project. System Shock series was a major inspiration for Bioshock series, which is considered its spiritual successor, as well as, to some extent, Portal series.