After the Eurasia colony incident the world had been left largely in ruin. Even though the shuttle managed to destroy the colony, enough still crash landed to create a large mess. Pollution from the crash of the colony has swept large sections of the planet and forced the human populace to retreat underground and to space to escape the pollution. Meanwhile the reploid population had been tasked with cleaning up the Earth.
While the reploid scientist Gate was researching the Eurasia colony area he stumbled onto a fragment of the Zero Virus and was driven mad.
3 weeks later…
X was then called in to deal with an incident where a mechaniloid went berzerk. However before he could finish off that mechaniloid, a replica that bore a strong resemblance to Zero appeared and finished it off. Before X could ask the replica anything he vanished and another reploid, named High Max, appeared and claimed to be investigating something called the Zero Nightmare. He asked X to stay out of the investigation, however given that Zero was involved X refused. And so X and High Max fought. However High Max proved to be too tough for X to handle at first. Though before the fight could continue High Max was ordered back.
After X returned to base, a reploid scientist named Isoc made an announcement declaring that this Nightmare was the ghost of Zero and was the cause of the whole nightmare incident. Isoc sent 8 reploids off to investigate areas where the phenomena was strongest (and to defeat Zero's ghost). But he also asked for volunteers in order to help search more areas. X immediately volunteered himself in order to help get to the bottom of the situation.
X quickly hurried to each of the nightmare areas in turn. In each one he discovered numerous reploids who had been working to restore the environment put in peril by emanations of the Nightmare phenomena. Thankfully though he was able to rescue the reploids. However the investigators who had been sent had succumbed to the nightmare and were driven mad in the process. X was forced to fight and kill them to prevent them from rampaging out of control. In doing so he had caught the attention of another though… The nightmare itself.
The nightmare appeared before him, taking Zero's form, and challenged X to a fight. X hesitantly accepted and fought against Zero's doppelganger. Though before the fight ended, the real Zero appeared and cleaved the nightmare in half. Zero revealed that he had been away for the past three weeks repairing himself and recuperating.
Once all 8 of the investigators, who had turned maverick, were defeated… the hunters discover it was Gate who had been the one who created the Nightmare virus in Zero's image and turned it loose. When the hunters confronted Gate inside his lab, he revealed that he had created both High Max and the Nightmare virus from a fragment of Zero he had found at the crash site.
Together X and Zero engaged High Max and Gate in combat and through their combined power managed to defeat them both. However, on defeat, Gate revealed that he had also revived Sigma in order to study him also. Sigma appeared and attacked Gate, injuring him, before taunting the hunters (telling them that he didn't need Gate's help to return) before challenging them to seek him out and fight again.
Along the way they found the reploid scientist Isoc… His mind completely wiped out.
The hunters sought out Sigma and once again defeated him in combat. Once Sigma was defeated, the hunters returned to retrieve Gate. They managed to locate and extract the injured Gate without further issue.