Sonic 4 Episode II THD is a side-scrolling 2D platformer. It is the second part of the story-based Action-Adventure game, and the first one is the best-selling Sonic 3D Classic. The story is about Sonic the Hedgehog, who must stop the evil Dr. Eggman from building a new Death Egg. Dr. Eggman is a scientist who has developed a machine that can create an egg of a desired size. When the egg is created, Dr. Eggman intends to use it to create a new human being. However, when the egg cracks, the creature that hatches from it is a blue hedgehog with a long tail.

The game begins when Sonic and Tails meet up with Metal Sonic, who has just hatched from an Eggman-made egg. They team up and begin to explore the world of Little Planet, where they find Dr. Eggman in the midst of his nefarious plans. The duo soon find themselves facing five major bosses in five different zones, and it is up to Sonic and Tails to stop them.