The story of Final Fantasy XIII-2 follows on from that of Final Fantasy XIII, but as is typical for the series, it is unrelated to all other previous Final Fantasy games. In XIII, one of the fal'Cie—a god-like race—transformed a team of six people, the primary characters of the game, into l'Cie (servants of the fal'Cie gifted with magical powers and a 'Focus'—an assigned task to be completed within a time limit), in the hope that they would initiate the end of the world. The six were intended to cause the large, inhabited floating sphere named Cocoon to fall into the world below, named Gran Pulse, killing all of the humans of Cocoon. At the finale of the game, two of the l'Cie transformed into a crystal pillar to support Cocoon, preventing the catastrophe.

XIII-2 begins three years after the end of XIII. Owing to the fall of Cocoon at the end of XIII and the collapse of its government (the Sanctum), at the start of XIII-2, most of Cocoon's inhabitants have moved down onto Gran Pulse, and some have learned magical abilities. Over the course of the game, a scientific body called the Academy becomes a new technocratic government. While the game starts off in the year 3 AF ('AF' being a new timescale set up after the fall of Cocoon), the story of XIII-2 jumps around several different time periods, and even parallel versions of different places, accessed via the Historia Crux. While most of the game takes place on Gran Pulse and inside Cocoon, there are two other major locations. One is the Void Beyond, a limbo between time periods. The other location is Valhalla, the capital of the goddess Etro. This place is a realm at the end of time where the goddess keeps a dark energy called chaos from escaping and destroying the timeline.