Mercenaries covers the years of 3044 to 3052, ending with the Battle of Luthien. As such, it is a prequel to the other MechWarrior 2 games and includes missions pertaining to the Clan invasion.

The player can take contracts from one of four factions, the Draconis Combine (DC), the Federated Commonwealth (FC), ComStar (CS), or the Free Rasalhague Republic (FRR). Generally, the background plot is of the Draconis Combine and Federated Commonwealth making initial moves towards yet another war between the two great powers, with the FRR and CS trying to play both off against the middle. The backdrop for this is the aftermath of the War of 3039 between the two great powers (which was effectively a stalemate) and buildup by both sides towards the next war. The player can take contracts by both sides without censure from either, though doing so will cause time-limited contract openings to close if the player is already "booked".

Missions include helping (and crushing) uprisings, generally on behalf of the FC and DC respectively, deep recon and raids, anti-pirate campaigns, and even fights against other merc units. The player can also attempt to win the crown of Champion of Solaris in the Battlemech Games, inside massive enclosed arenas. These missions proved so popular that they were brought back in MechWarrior 4: Mercenaries.

The buildup to a war between the two Great Powers suddenly comes to a dramatic twist with the invasion of the Clans. The player is thrust into the battles against the "unknown mechs" of the Clans. For a time captured by Clan Wolf, the player returns to the Inner Sphere and fights some of the major battles of the invasion such as the Battle of Wolcott (which is represented inaccurately as a multi-day campaign rather than a multi-minute ambush) as well as the climactic Invasion of Luthien.

The game ends with a cutscene of the Battle of Tukayyid with a lance from the Com Guards, led by Comstar's Precentor Martial Anastasius Focht, destroying a Clan Star.