After the Xenites' defeat in the Galactic Conflict which took place in the first Xenon, they have returned with a plan to wipe out the player's history by planting four bombs in space-time areas. The Megablaster pilot will have to fend off the bizarre wildlife around them. It is necessary to destroy the largest animal in each area as they have been fused with the bomb; once the creature is slain, the bomb is shut off.

Xenon 2 Megablast is a vertically scrolling shoot 'em up. Unusual for the genre at the time, the player's spaceship can reverse the scrolling of the play area for a limited distance; which is used in the game for defeating bosses, avoiding enemies and escaping dead ends. This game consists of five levels which are each divided into two sections.

The game has a generic sci-fi theme and almost no plot, focusing instead on presentation and gameplay. Indeed, it was the quality of the music and graphics that led to the game's memorability. The graphics bear the trademark "Bitmap Brothers" appearance, with realistic and detailed renditions of rock and metal objects. The enemies are mostly various nondescript organic creatures, plants, bacteria-like lifeforms, though the final levels feature robotics, mechanical enemies, and various artificial hostile entities.

The player of Xenon 2 Megablast must rely heavily on power-ups, which may be gained by shooting power-up containers that appear through the levels. When an enemy or a wave of enemies are destroyed they leave behind credits in the shape of bubbles. Small bubbles are worth 50 credits and large bubbles are worth 100. When a mid-level boss or end of level boss are destroyed, they explode to reveal lots of credit bubbles. Credits are then spent at a shop owned by Crispin The Alien (who bears a remarkable resemblance to the alien from the film Predator). Power-ups of various sorts may be bought there. Accumulating power-ups rewards the player with more heavy-duty firepower. The shop appears mid-level and at the end of the level.

At later levels, getting credit bubbles becomes easier, as certain areas contain an endless supply of enemies - strange bee-like creatures and killer kites - which will always drop a credit bubble upon dying. If the player stays long enough, making slight movements backwards, he can get an enormous amount of credits. This is where a major glitch occurs in Xenon 2; if you accidentally "over-collect" the credit bubbles trying to maximize your money to the highest possible amount, the money amount will simply over-lap back to zero, and the player only finds this out upon finishing the level. So if the money counter is over-lapped, and the player is left with something like 200 or 500 credits, the game becomes next to impossible, and the player has to start all over again.

The PC version of Xenon 2 contains a cheat mode: in the graphic menu press F7, then to activate, press the "i" key while playing in order to become invincible.

The Bitmap Brothers co-operated with the British musician Tim Simenon to include the 1988 Bomb the Bass hip hop track "Megablast (Hip Hop On Precinct 13)" as theme music, which is also the origin of the game's subtitle. In turn, this song features many samples from Sly and the Family Stone song, "You Can Make It if You Try", and its theme seems heavily inspired by the The Splash Band track "The End (Disco Version)" released in 1984, which is itself based on the theme of John Carpenter's film Assault on Precinct 13.

There are two versions of the track in the game: a nearly faithful rendition (only missing a few spoken lines) as the loading music, and a simplified version as the in-game background music. The Amiga version of the loading music is based on the same track, but significantly different, with such changes as helicopter sound effects at the beginning and end.

The game was one of the first instances of a computer being programmed to play a pop single with reasonable accuracy. Sections of the music were sampled and then re-sequenced. In the cartridge-based console versions, the music is radically simplified, being purely synthesized and lacking the voice samples of the computer versions.

UK magazine C&VG gave the ST and Amiga versions scores of 94 and 96%, respectively, praising graphics, sound and gameplay and calling it "utterly superb".

Xenon 2 Megablast is widely regarded as one of the most difficult shoot 'em ups of the Amiga and Atari ST game era of the 1990s; in light of the effort required to complete the game, fans (including Peter Molyneux of Bullfrog Software) were said to have been greatly disappointed by its outro: the shopkeeper, in his usual setting, congratulates you for finishing the game, and tells you you can now turn off your computer. Then the screen goes black, and waiting will not help. However, in the PC-Version when you hit fire in this screen the game starts from the beginning in a special mode: Most enemies have more health, which increases the difficulty a lot.

The game was ranked the 33rd best game of all time by Amiga Power. In contrast, Amiga Format's review of the CDTV version (Issue 39, October 1992) was very harsh: they rated it a paltry 32%, commenting that, while innovative at the time it was first released, the game had aged poorly and its gameplay was not well balanced.

A recent retrospective look on the Mega Drive version by HonestGamers echoed the sentiment that it had aged very poorly. It also complains about the scaled-back soundtrack and how the console port drops the last level entirely. It scores it a low 3/10.

It is a remake of the first level of Xenon 2, originally published on a cover disk attached to PC Format magazine. Within the issue were tutorials on its creation. It is also available for download from the Bitmap Brothers site. Despite the "new" visuals, Xenon 2000 lacks the original game's electronic soundtrack.

Alpha Helix, producers of the game The Last Eichhof, paid tribute to Xenon 2 by naming the most powerful weapon in The Last Eichhof "Xenon 2 Cannon".