Please Note: Spoilers
Three days prior to the events in the game, Varrigan City had become a target for a group of terrorists known as "The Organizers", who severed the island city's transportation and communication ties with the rest of the world, and then released a virus onto its population that would kill them in less than 24 hours. However, the Organizers informed any person that killed another would receive the vaccine. The city was quickly transformed into the stage of a reoccurring game show called Death Watch, with announcers Howard "Buckshot" Holmes (Greg Proops) and former DeathWatch fighter Kreese Kreeley (John DiMaggio). The remaining citizens of Varrigan City as well as new hopefuls become the show's contestants, hoping to become the top-ranked fighter in the game and win a large cash prize.
Jack Cayman (Steven Blum), a man with a retractable chainsaw built onto one arm, enters the games and manages to gain sponsorship from "Agent XIII" (Jim Ward). The game's organizers, led by Noa (Dwight Schultz), realize that Jack's motive is more than just to win, and learn that Jack is working with someone on the outside. They come to learn that Jack was a former marine and a three-time former champion of previous DeathWatch games, but now seems intent on a mission. Noa surmises that Jack is after the mayor's daughter, who is still inside the city. While they could kill Jack at any time, they realize Jack has become an audience favorite, with many sponsors and viewers betting on his success, and are forced to try to kill Jack while he is in combat.
Jack, meanwhile, saves Leo (Danny Cooksey), a doctor from a hospital that was unwittingly trapped in the city but managed to obtain the vaccine. Jack tells Leo to try to stay low until the games are over, and continues to seek the mayor's daughter. When he finds her, he realizes she's willingly staying in the city to watch and be near to the games. Jack refuses to do anything for her. Instead he seeks to find out exactly how and why Varrigan City became Death Watch, recognizing that there was no way that the city could have been transformed that fast without deep planning. As Jack nears the last battle against reigning champ The Black Baron (Reno Wilson), Agent XIII reveals himself to be Lord Gesser, an influential figure in politics. Lord Gesser reveals that he knows that the Death Watch games were created to quench mankind's thirst for blood and violence in the absence of war, but admits that this particular incarnation of the games is solely driven by someone's greed, and passes on the name of Springvale to Jack and the Agency. The Agency quickly recognizes the name as a pharmaceutical company and that they were the silent hand that had built, in anticipation of Death Watch, much of the sets for the games as soon as the Organizers had released the virus.
Jack fights and defeats the Black Baron. Noa attempts to accost him, but he is shot and killed by Leo. Leo tries to thank Jack for his help, but Jack slices into his side. Jack then disables his communication link with the Agency as he accosts Leo while Leo writhes in pain, Jack tells Leo he is aware that Leo's father, the president of Springvale Pharmaceuticals, had created both the virus and the vaccine, and were planning to use the televised Death Watch event demonstrate the effects of the virus as to blackmail other countries to pay handsomely for the vaccine under threat of the virus release. Leo admits that their company lost a large amount of money on the last presidential election and saw this route as the easiest way to recoup their losses. Leo then admits he was only in the games to be close to the action, fascinated by the sport, and then begs for Jack to help him. Instead, Jack skewers him on his chainsaw and tosses the body off the high tower, stating "I don't help people, I kill them".