As with the first game, Max Payne 2's story begins in medias res, opening with Max in hospital, severely injured. Upon being released he is attacked by an assassin and in the process former NYPD Deputy Chief (Now Lieutenant) Jim Bravura is shot. Max escapes into a room where he finds the dead body of his partner, Detective Valerie Winterson.
The story then jumps backwards in time, back to the end of the last game. In court, Payne is charged with multiple homicides, including the death of another detective (Alex), and mayhem. He is cleared of the charges when it is proven he did not kill Alex, and the other homicides are cleared on Senator Woden's requests (who had promised Max he would do so.) Max, now free, leaves the DEA, and resumes his job as an NYPD detective.
Two years later, Max is investigating a series of murders by a group of contract killers known as "The Cleaners". Max encounters Mona Sax, who he assumed dead. Wanted for the murder of Senator Gates, Mona is arrested and taken to the police station, despite Max's protests. At the station, Max overhears his new partner, Detective Valerie Winterson, speaking on the phone about Mona. The station is attacked by the Cleaners, who are pursuing Mona. Before they reach her, Mona breaks out of her cell and manages to escape the station. Max meets Mona at her residence, where they fight off the Cleaners who had followed him. They then begin hunting down the people responsible for the attack.
Their search leads them to a construction site, where Max and Mona defend themselves against the Cleaners. After their foes flee, Detective Winterson arrives and holds Mona at gunpoint. Mona claims that Winterson is there to kill her while Winterson claims that she is merely trying to arrest a fleeing fugitive. After several moments of consideration, Max shoots Winterson, allowing Mona to escape. Before she dies, Winterson shoots Max, leading to his hospitalization.
The game then resumes from the beginning where he was standing beside the body of Winterson. After Max decides to escape an attack on hospital perpetrated by the Cleaners to protect Jim Bravura as well as himself, he begins looking for answers. Later, he is kidnapped by Vladimir Lem, head of the local Russian Mafia with whom he entered into an alliance years ago. Max learns that the Cleaners work for Lem, who uses them to eliminate the competition to his businesses. Max also learns that Lem is part of a secret organization known as the Inner Circle. Lem plans to kill Woden and gain control of the Inner Circle. Max then learns that Mona is a hired gun for Woden, who has been given orders to kill both Lem and Max. After Lem reveals that Detective Winterson was Lem's mistress, he shoots Max and leaves him for dead. Mona rescues Max and together they go to Woden's mansion to save him from Lem.
After infiltrating the mansion, Mona knocks Max to the ground in an attempt to follow her orders to kill him, but discovers that her feelings for him keep her from doing so. After realizing that Mona will not kill Max, Lem emerges from hiding and shoots her. Woden then comes out of the house's panic room in a wheelchair (He has cancer which caused and can longer walk), and lunges at Lem, only to be killed in the ensuing struggle. Max and Lem battle until Lem triggers a bomb that he planted in the mansion. After they both drop to the floor below, Max chases Lem through the mansion. Max faces Lem in a firefight and eventually destabilizes the platform below Lem, causing it to fall to the floor below and kill him. Max returns to Mona's side as the police arrive, and she dies in his arms. In an alternative ending, upon finishing the game in the highest difficulty level, Mona survives.