The game takes place on Anachronox, a small planet floating inside a huge artificial sphere known as Sender One.

In the dystopian future of the year 2052, society slowly spirals into chaos. A lethal virus, the “Gray Death”, ravages the world. The only vaccine, “Ambrosia”, is in such short supply, it is only available to those wealthy enough and deemed “vital to the social order”. With no hope for a cure for the common people, riots occur worldwide and a number of terrorist organizations have formed.

Several religious and political factions see an opportunity to re-shape a worldwide government to their agendas. In this techno-nightmare, take part in the dark struggle to raise the world from its own ashes.

The game's setting is similar to that of Final Fantasy VI insofar as it is a world with considerably more advanced technology than the first five games in the series. Overall, the game's technology and society approximates that of an industrial or post-industrial science fiction milieu. The world of Final Fantasy VII, referred to in the game as "The Planet", but retroactively named "Gaia", is composed of three main land masses. The eastern continent is home to the city of Midgar, an industrial metropolis that serves as the capital city and hosts the headquarters of the Shinra Electric Power Company, which operates as much of the world's de facto government. Other locations on the eastern continent are Junon (Shinra's major military base), Fort Condor (a fort with a huge condor covering up a Mako reactor on top of it), a Chocobo ranch, and Kalm (a small town inspired by medieval Europe).

Soon after the beginning of the game's introduction, the player begins the investigation in the Anekbah sector. He uncovers information that suggests the serial killer he is looking for is in fact not human but actually a demon. When members of an apparent underground, anti-government movement contact the player and confirm his suspicions, the investigation deepens and uncovers information; one of Omikron's chief police commanders, Commandant Gandhar, is a demon pretending to be human and lures human souls into Omikron from other dimensions by way of the Omikron video game. Kay'l 669 asking the player to help him was a trap: supposedly, if the in-game character dies, the real human playing the video game will lose their soul forever. Despite many assassination attempts on the protagonist's life by other demons working behind the scenes, the player destroys Gandhar with supernatural weaponry.

Due to severe overpopulation, the planet Earth’s diameter is increasing with the growth of towering mega-cities, each inhabited by millions of humans. Buildings are growing ever-upwards, interconnected with a thick web of roads, walkways and service channels. In these giant human hives, only the affluent may feel the rays of the sun and breathe the cleaner air.

The game takes place in the year 2065 in Hong Kong. The city is suddenly attacked by a hostile force known as the Republic, led by a rogue Chinese general named Yan Lo. An international peacekeeping force stationed in Hong Kong, known as the Liberty Coalition, is tasked with defending the island from the invasion. The story follows Liberty Coalition 2nd Lieutenant Nathan Frost, who is critically injured in a surprise attack by the Republic while attempting to save the life of a wounded soldier. He is rebuilt by the Coalition using experimental nano-technology. Using the powers granted to him by his nano-technology augmentations, Frost spearheads the Coalition's counter-attack against the Republic, eventually rescuing a defecting Republic scientist named Dr. Joseph Liaw. Dr. Liaw informs Frost about a plot by General Yan Lo known as Project: Snowblind.