Known as Gogetsuji Gaiden: Saikyou Densetsu (豪血寺外伝 最強伝説) in Japan. This installment lacks the Power Instinct title in its localization; this would be a trend for the series in its subsequent western releases, officially phasing out the Power Instinct branding. The game's story picks up from the last game, with Otane being defeated by Kanji Kokuin, who became the new leader of the Gouketsuji clan.

This game is a sort of "update" to Power Instinct 2. All previous characters reappear, plus a few new characters. Super Kurara and Pochi are individual characters; because of this, Kurara and Kinta lost their transformations but gained new moves to replace them. Otane is also made playable. There is one new playable character, Kuroko, and a new playable boss, Chuck, bringing the cast to 16 characters.

The battles are in teams of two characters, a leader and a partner. This plays out similarly to The King of Fighters, where you fight with each character one after the other. A Super Block and a Charge Attack were brought into the gameplay. A Super Block can nullify the opponent's blow and allow for a counterattack, and a Charge Attack can immediately knock down the opponent or launch them into the air for another attack. All of the characters were given new special attacks, though the majority of them were exclusive to this game.