Shadow Warrior 2 can be played in single-player mode, or in a new 4-player co-op mode. In co-op mode, each player experiences the narrative as Lo Wang but sees other players as various anonymous ninjas.

The level environments are more open and nonlinear than in the previous title. New traversal mechanics have been added, such as climbing walls and double jumping to allow for more exploration The mission structure in Shadow Warrior 2 is less restricted than its predecessor, and players can now revisit earlier missions to re-engage past enemies in order to upgrade Wang's skills. The game features a hub area where the player can acquire quests and upgrade their abilities before beginning a mission. Every mission, except for story-specific events, features a randomly generated level design and content that includes randomized map layouts, enemy positions, terrain, buildings, and weather conditions. The game utilizes a procedural damage system that allows players to cut and blow off enemy limbs and body parts.

The game features over 70 different weapons, varying between firearms and blades. Killing enemies will level up weapons and reward the player with gems to augment their equipment with elemental properties and buffs.