The "bubble dragons" of the first game, Bubblun and Bobblun (known as "Bub and Bob" in the western releases) appear in Rainbow Islands in their human forms as "Bubby" and "Bobby".

Following the events of Bubble Bobble, Bubby and Bobby set out to defeat the "Dark Shadow" and rescue the Rainbow Islands.

If the small diamonds are collected in the correct order, the player will get to a secret room at the end of each island, which contains a permanent power up.

[4] The European Master System port contains a bug that crashes the game after Level 7, sending the player back to the title screen.

In Japan, Game Machine listed Rainbow Island: The Story of Bubble Bobble 2 on their December 1, 1987 issue as being the second most-successful table arcade unit of the month.

[28] The Spectrum version of the game was number-one on the UK sales chart from May[29] to June 1990[30] at the time of release.

[33] UK magazine C&VG gave the ST version a score of 93%, praising the graphics and calling the game addictive and "tremendous fun".

[23] Edge wrote in 1994 that "Taito's Rainbow Islands has all the ingredients for a superb videogame – incentives, copious rewards and bonuses, and intelligent bosses".

He added that the gameplay still felt fresh and unique despite the passage of years, and was good enough to make the collection a must-have by itself.

[38] It held the spot for years until losing to Sensible Soccer, which retained the title for the rest of the magazine's run.