The Evil Within 2 shares the first game's general setting: STEM. STEM is a room-sized, cyberpunk rig where individuals upload their minds into a shared consciousness, creating a simulacrum reality. A single person, the "core," governs the landscape's shape and behavior.

Ruvik, a lunatic scientist, had partnered with Mobius, a shadow organization, to create STEM. Mobius eventually betrayed Ruvik. They removed his brain and used it the biological core in a STEM unit set up in Beacon Mental Hospital. Anyone connected became subject to Ruvik's will.

STEM originally required a wired connection between its subjects and hardware. Immediately prior to The Evil Within, Mobius made wireless connections possible. Subjects perceived its wireless signal as high-pitched radio feedback, at which point they gradually integrated with STEM's virtual reality.

Sebastian first entered STEM when responding to an emergency police call from Beacon. A wireless signal pierced his cruiser's radio, reeling him in. Importantly, the player assumed control of Sebastian after STEM's first contact.

Hallucinations overwhelmed Sebastian when he entered Beacon. Unconscious, he resisted STEM's horrors while Mobius's staff captured his insensate body. They connected him physically to the machine, and his full nightmare began.