The game includes new zombie mutations, a dynamic weather system which can alternate between sunny and rainy conditions, and new "hub defense" missions. 
The game's story picks up right where the initial Dead Island left off, with the survivors landing on a military ship after their flight from Banoi. However, they are kept imprisoned inside the ship and experimented on individually. The characters thought that they had escaped the terrors of Banoi and survived the approaching apocalypse, but their fate takes a turn for the worst.
The virus then spreads throughout the carrier and the nightmare begins anew. With the crew wiped out by the infection, the Heroes escape their quarters. A shipwreck follows soon after. The survivors find themselves on the island of Palanai, located in the Banoi archipelago. Palanai has also been struck by the infection, and the island has been overrun with zombies. The survivors are found on the beach by a woman named Harlow. She instructs them to head to the survivor camp called Paradise.
As they arrive the camp is under attack by Infected and the Heroes must help defend the camp. After the attack the main plan is to reach the city of Henderson to contact the Military for Extraction. They head to Halai to see if there are any boats available to take to Henderson but the survivors there tell them that all the ships left long ago. They try the road but it is washed out. The only choice left is to take the underground tunnels that the Japanese built in World War II, but they are flooded. They build a water pump to drain the tunnels but they have to defend the area for the noise attracts the undead. Once in the tunnels they must fight through undead and living enemies. As they reach the crossing to Henderson they find the station has been taken over by Convicts so with no choice they have to kill them. Once the ferry has been called the Heroes must defend the station, and once the ferry arrives they must engage the Screamer.
They finally arrive in Henderson only to find the city completely overrun with infected. Even the military base fell to the undead hordes. The Heroes secure the old movie theater as a base of operations for the time being. The Heroes check out the base to contact the Army to extract them, but the only response they get is from Frank Serpo, claiming that the colonel is dead and that he is sending a chopper. As the chopper arrives Serpo tries to trick the Heroes into boarding the chopper so he can leave the normal people behind to die. Not falling for it, Colonel Hardy tries to board so he can leave but is shot by a soldier. As a result of this, Logan shoots the chopper down using a Law missile launcher. The chopper crashes at the old fort and the heroes go to see if it is salvageable but the chopper is completely destroyed.
They follow a trail of blood to an injured pilot who tells them that Serpo killed one of the pilots to distract the Infected so he could save his own life. After that they find Serpo who tells them that Harlow is a terrorist who was planning on selling the Virus to make "a shit load of money" and that she is in the quarantine zone at the docks. The Heroes break open the quarantine zone gates and rush to the docks where they find all the human survivors dead and Harlow ranting. She says the government unleashed the virus on Palanai to test the lethality of the new bio-weapon they planned on using, and the immune could never leave the island or the whole world would end up like Banoi and Palanai Island.
Harlow shoots up with the mutagen and fights them. The heroes take a dose of the mutagen to defeat Harlow. After the fight they find a boat and prepare to leave when Frank enters the room. He pleads for the immune to come with him saying he could cure them from the mutagen. Instead, they leave him to his fate and he is attacked and killed by Infected. As the boat is leaving it is shown that the hospital camp and movie theater have been overrun by Infected. A Ram busts through the security shutters 6 days later, and the ship is seen docking at an unknown island as news reports are saying that Palanai and Banoi are returning to normal. Also, it seems that the Heroes are deceased, as wretching and gurgling sounds of zombies can be heard inside the ship.
- Players can import their Dead Island game progress. If players do not import their character, they can start a new character and will automatically begin with level 15.
- Cash and weapons will not be imported, only the skill trees.
- Disconnections are dealt with seamlessly, as opposed to offering a break in play.
- Level limitations between co-op players have been removed, with auto-balancing for enemy groups being implemented.
- Weapons are more durable and last longer.
- Rare weapons such as Zed's Demise and Destiny Pickaxe are no longer quest rewards, you must find them through chests spread out across the game world.
- Firearms do much more damage to zombies than what they would normally do in the previous game.
- New weapons such as mines, poison and sonic bombs, rocket launchers, and sniper rifles.
- New mutated zombies, including the Wrestlers, Grenadier, Drowner, and the Screamer .
- Zombie spawning system has been altered and overhauled.
- Sidequests have been advanced and feature special enemies (within areas marked as Dead Zones) which bear their own backstory. These enemies are higher difficulty, can often instantly kill players or deal severe amounts of damage within 1-3 hits, and cannot be kicked/knocked back.
The game's pricing is $49.99. Deep Silver has tried to put to bed some of the rumors that have already emerged due to the pricing of the game. They confirmed that "it is a new game, not a remake." This was followed by an explanation for the low price tag: "That's not a placeholder, that's the real price! It's the end of a console cycle — we think this price makes a lot more sense."