Gameplay largely involves exploring a vast underground mine, coming up against enemy creatures while finding various resources as the player digs their way downwards.

As the game progresses, Dorothy can gain abilities and weapons such as pressure bombs, a hookshot, and a pneumatic arm that can punch through rock.

[8] Following Rusty's disappearance at the end of SteamWorld Dig, Dorothy, a robot who he had befriended, travels to the mining town of El Machino in order to search for him.

While searching the mines for Rusty while also hearing rumors of him turning into a monstrous machine, Dorothy comes across a group of devolved humans, called Shiners, addicted to the drug moon juice.

Dorothy manages to defeat Rosie and rescue Rusty, only for the distillery to become unstable, prompting Fen to stay behind while she warps the two to safety, allowing them to escape on a rocket with the other El Machino residents before the planet explodes.