As this game is set during year 2097, according to the introductory sequence, a sequence also provides the history of this game's setting: during year 2057, the depletion of Earth's resources coincided with widening space exploration. After a catastrophic war over ever-declining resources, ending 10 years prior to the events of G-Police, Earth's governments were stripped of military power. As a result, powerful corporations had exerted control over Earth and the burgeoning space colonies. The Government Police (G-Police) was formed by Earth's remaining coalition government to maintain order in these colonies.

In the latter part of the introductory sequence, Slater, the game's protagonist, introduces himself as a war veteran who had joined the G-Police to conduct his own investigation of his sister Elaine's apparent suicide, suspecting that she was murdered. He also provides his view of the G-Police, stating they lack authority and "turn a blind eye" to "shady corporate deals" while attempting to maintain order. He describes the Havoc gun-ships as outdated and the pilots as a mixture of desperate war veterans and naïve idealists.

The action takes place in a futuristic urban setting, occasionally illustrated by cut-scenes. The early levels of the game depict Slater combating enemy gangs. The G-Police suspect "Krakov" corporation is supplying the gangs with weaponry. Krakov's president however is subsequently the subject of an assassination attempt by the gangs. During this attempt, Hiroshi Tachikawa—a pilot whom Slater describes as flying his gun-ship "like he was born in it"—dies when his gun-ship crashes after mysteriously malfunctioning. In the interests of morale, the nature of his death is covered up; Slater notes this incident is reminiscent of Elaine's death.

After numerous insurgencies, invasions, and terrorism, on its personnel and property, Krakov blames a rival corporation, "Nanosoft", and begins openly attacking them with its private army. Lacking evidence for involvement with the criminal gangs, the G-Police protect Nanosoft, ultimately destroying Krakov's military power. The G-Police, however, investigate exactly why Krakov and Nanosoft were fighting. The latter half of the game depicts a conflict between the G-Police and Nanosoft's private forces, which attack G-Police after Krakov's collapse, both out of panic as to the investigation and to tie up loose ends.