In 22th century, scientists found a way to create artificial beings whom they called "gears". These gears were very powerful, but did not have wills of their own, and were completely obedient to the humans. However, a gear named Justice was able to free himself from the control and led a rebellion against the humans. Since then, the humanity lived in fear that the gears will one day gain the power on the Earth. For that purpose, the Sacred Order of the Holy Knights organized fighting tournaments to find out who is strong enough to face the renegade gears.

Guilty Gear Petit 2 is very similar to its predecessor, having the same "super-deformed" graphical style, battle moves (including the tension system to accumulate power and combo attacks), as well as backgrounds for battles. Several new characters appear in Guilty Gear Petit 2, such as Zato-1, the former head of the assassin guild, the pirate captain Johnny, the time traveler Axl Lou from the 20th century, the mysterious Faust, and others.