It starts as a simple assignment for the three mercenaries - Fear Effect 's Hana, Glas, and Deke. Somewhere in the futuristic Hong-Kong, full of huge corporations, flying cars and helicopters, home for the famous Triad mafia, they have to find the young Wee Ming Lam, the daughter of a powerful gangster. But Hana and her partners don't suspect that the search for Wee Ming will lead them not only to very dangerous areas of Hong-Kong, but to outskirt villages infected by zombies, a dubious restaurant-brothel, and the Chinese hell, where they'll have to confront Yim Lau Wong himself - the Chinese equivalent of the Western Satan.
The gameplay of Fear Effect is similar to survival horror titles such as Resident Evil, but it also features many pure action elements and arcade-like sequences, where precise timing matters. The player controls Hana, Glas, or (in a few instances) Deke during different chapters of the story. Player characters can crouch, sneak on enemies, and roll forward or to the sides. There are many human as well as monster enemies to eliminate or avoid. Characters can run and shoot at the same time, as well as use two weapons at once to combat multiple enemies. A considerable portion of the gameplay is dedicated to puzzle-solving.
The game's fear meter system replaces traditional health bars, adding a layer of tension and strategy to the gameplay. When the character's fear level turns red, it can be killed by further damage or stressful situations. However, this meter can be restored to normal by reducing stress through actions like solving puzzles or taking out enemies stealthily.
The game's 3D character models are unshaded, aiming for a cel-shading technique and anime art style. The backgrounds are pre-rendered and often consist of streaming or looping full-motion video. The story unfolds through numerous pre-rendered movies.