Dungeons 2 is a more direct homage to Dungeon Keeper than its predecessor. The player still takes on the role of the Ultimate Evil, but now as a disembodied spirit after his defeat by heroes of the Overworld. The player must rely on controlling minions with the Hand of Terror. Named minions are hired, and can be leveled up and trained to be more powerful. The player must meet the needs of the minions in order to keep them happy, or they may disobey commands.
The player has to build the dungeon by selecting blocks for the minions to excavate. Rooms can be built onto empty spaces, but blocks can be filled back in as well to wall off an area. Some of the resources like gold and mana are hidden inside stone blocks while some walls cannot be excavated.
A major change from Dungeons is that the Overworld can now be entered through the same cave exits used by heroes who raid the dungeon. Once on the Overworld, the game switches to a real-time strategy mode, allowing the player to command minions as they attack player holdings. The ultimate goal is usually the destruction of a castle, but there are other separate dungeons holding quests too.
A sarcastic omnipresent narrator narrates the Ultimate Evil's acts of vengeance or inaction, in which case it pushes the player to the right path. Humorous references to games like Dungeon Keeper, Warcraft, and fantasy series like Lord of the Rings and Game of Thrones are commonplace.