Ultima Underworld II: Labyrinth of Worlds takes place one year after the events of Ultima VII: The Black Gate. To celebrate the defeat of the Guardian, Lord British invites the Avatar and his companions to his castle. However, in the night of the feast the Guardian attacks again, encasing the castle in a giant gem of blackrock. Deep in the sewers of the castle, another blackrock gem is found, created as an aftereffect of the attack. This gem is a teleporter to other worlds controlled by the Guardian. Now you, the Avatar, must travel to these worlds in order to free the castle from the Guardian's spell.

This sequel to Ultima Underworld plays almost exactly as the original, with its 3D world, action-oriented combat, and magic and dialogue systems. The storyline is more connected to the main Ultima series and the game world is larger and has more variety: besides the usual castles and dungeons there are such diverse locations as an ice world, a totally alien place called Talorus and the enigmatic Ethereal Void. Graphics and sound have also been improved: the size of the viewing window has been increased, there are all-new monster graphics and the game now features digitized sound effects.