Xenosaga: Episode II - Jenseits von Gut und Böse is a direct sequel to the first episode of the science-fiction RPG Xenosaga series.

The story takes place thousands of years in the future, when mankind has long left the Earth, which is now called Lost Jerusalem, and founded a star empire. The main threat humanity has to face is the appearance of a super-powerful alien race called the Gnosis. The story picks up just after the concluding events of the first episode. Shion Uzuki, the young engineer who designed the powerful android KOS-MOS, arrives with her friends at the planet Second Miltia. They aim to learn more about the heritage of the late genius scientist Joachim Mizrahi, and foil the schemes of the mysterious antagonists Albedo and Margulis. Jin Uzuki, Shion's brother, who was only mentioned in the first chapter, becomes an important controllable character in the second episode. Much of the plot's content is dedicated to exploring the past and the origins of Jr., as well as his connection to Albedo.

The gameplay in general and the battle system in particular are similar to that of the first game. All enemies are visible on screen, and field objects can be destroyed in order to attract the attention of the enemy or to create a zone that will weaken it. The turn-based combat again features two types of basic attacks, which now inflict different damage on enemies of different height. Special attacks can suspend enemies in the air or flatten them on the ground, which makes them more vulnerable. Enemies can also be "broken" by specific combinations of attacks, which are in many cases the only key to victory. Another addition is the ability to wait two or three turns in a battle, accumulating energy for a stronger attack, which can be used tactically whenever the opponent is in a weakened state.

The AGWS (giant mech) battles are still present in the second episode, but it is no longer possible to switch to AGWS at any point, as it was in the first game. Instead, these battles are dictated by the plot and require the player to exploit the unique abilities of the mechs. Another game aspect removed from the first game is money, as well as shops, weapons, and armor of any kind. The only items in the game are healing items or keys that unlock the ability to learn high level skills. The skill system has been re-designed, each character possessing his or her own "tree" of unique skills they can gradually learn. Like in the first episode, the dungeons contain environmental and logical puzzles to solve.

The second episode continues to be heavy on story development, and also has a significant amount of non-interactive cutscenes. Character graphics underwent an aesthetic change: the characters look now somewhat more realistic and less influenced by anime visual style.