Dead Fantasy II is the first segment to show the use of magic on both sides of the battle, and the first to feature a character not directly linked to the namesake franchises of the series: Kairi of Kingdom Hearts. The movie was featured at the Anime Boston convention on March 23, 2008.

The episode starts where Dead Fantasy I left off: a three-on-three battle with Tifa, Yuna, and Rikku against Ayane, Kasumi, and Hitomi outside the temple. Using different combo moves and team strategies, the girls of Final Fantasy easily overpower the Dead or Alive trio. Realizing they need to do something, Ayane goes to the top of the tower, charging her Ninpo power while Kasumi and Hitomi defend her. Yuna, Rikku and Tifa try to stop them but are unable to. Ayane destroys the temple with her magic - reflecting her ending in Dead or Alive 4 - forcing them all to fight during a vertical fall.

Halfway down, Rachel, who has been waiting perched on her Warhammer, destroys the rest of the tower, making all of them fall towards a river of lava at the bottom. The fighting continues as the girls flow down stream on a slab of rock, until they hit a lava-fall. Rinoa freezes the lava over and she, along with Kairi, join in with the battle. Rinoa then teleports the girls to different locations throughout the world: Rinoa is sent with Rachel, Tifa with Hitomi, Yuna with Kasumi, Rikku with Ayane, and Kairi by herself. The movie ends with Rikku and Ayane, both of whom are unconscious, falling into a giant hole.