Digimon World 2 is a dungeon crawler RPG, a departure from its predecessor Digimon World, which focused on raising Digimon like pets. The player explores vast labyrinths dubbed "Domains", inside a tank called a "Digi-Beetle". These dungeons are filled with enemy Digimon, who once encountered, trigger a battle with the player's own team of Digimon in a battle system similar to other traditional turn-based JRPG's. The domains also contain various obstacles and traps such as land mines, energy fields called "Electro-Spores", giant stones, acid floors, treasure chests. Most traps can be disposed of by items that can be purchased at stores found across the game, and enemy Digimon can be befriended with "gift" items. However, the Digi-Beetle has a limited inventory, requiring careful management of items. Typically, at the end of each Domain there is a Boss, whether it be a lone Digimon, or another Tamer with a team of them. After defeating the Boss, the player may exit the Domain by means of an "Exit Portal" found near the Boss' location.
As the player's Digimon grow in levels, they are able to "digivolve" into newer and more powerful forms. The game contains four levels of Digivolution, Rookie, Champion, Ultimate, and Mega. The player can also make use of DNA digivolution to fuse two Digimon and create a new one, which will have higher stats and inherit all the techniques of its parents. Every Digimon's progress is limited by a level cap, after which they are no longer able to gain experience, forcing the player to make use of DNA digivolution to increase the level caps