The game is set four years after the end of Soulcalibur, which puts the game's story in the year 1590 AD.
The wave of slaughters that terrorized Europe reached a sudden end. The knight in azure armor, Nightmare, and his followers were successful in collecting enough souls and were about to start the restoration ceremony on the ruins of the once-proud Osthreinsburg Castle. But just as the ceremony was to start, three young warriors assaulted the castle. In a matter of time the cult was defeated and Nightmare stood in front of the young warriors wielding Soul Edge. After an intense battle Nightmare fell, but then the evil soul inside Soul Edge sent the young warriors into a vortex of hellfire and stood to confront them. As a result of Soul Edge's evil aura, Krita-Yuga revealed its true form: that of the Holy Sword, Soul Calibur.
The intense battle ended with the victory of the holy sword, but at the collapse of the vortex of Inferno, both swords along with the Azure Knight Nightmare were sucked in a void and expelled in another place. Siegfried Schtauffen, who was until a moment before the Azure Knight, reclaimed his own mind. Recognizing his sins, he set on a journey of atonement. Still the blade held a strong bond, and every night it took control of the body and took souls of those nearby. The efforts made by the young knight were fruitless, and four years later the Azure Knight returned.
Around those times various warriors came into contact of the blade's remaining fragments, revealing Soul Edge's ultimate survival. After its defeat the fragments began causing chaos and evil to grow in the world. Driven either to possess or destroy the evil sword, each warrior embarks on a new journey, while Nightmare starts his rampage anew, seeking souls to gain the power to restore Soul Edge once again...
