Grotesque Tactics II: Dungeons & Donuts starts directly after the ending of the predecessor: the evil was defeated, but now a mysterious mist teleports people into the catacombs. As Drake, one of the main characters of the predecessor, the player has to find up to six companions and defeat the new evil. Because most of the game is spent in the catacombs, the game is less colourful than before.
The core of the gameplay mechanics are unchanged: this is still a role-playing games with tactical turn-based battles. Those take place on hexagonal fields and every action costs action points. Of course the different characters have certain abilities, e.g. fast ones can cross more fields per turn or angels can heal others without needing to resort to potions. Each character can unlock four abilities when leveling up. New is the possibility to circle enemies for extra damage.
Outside combat, the player moves Drake over the map to explore the surroundings, make conversation or buy equipment. Most of the time is spent with doing quests for the three guilds (mercenaries, elves and Holy's Groupies). In some situations, the factions have contradictory goals and the player has to choose between them. This has small effects on the gameplay and the ending. Like in the predecessor, the player is confronted with humour, bizarre situations and references to pop culture, fantasy tropes and other games.