Three months had passed since the Raccoon City incident. The peaceful town has been destroyed by a nuclear missile due to the outbreak of the T-Virus that was instigated by Umbrella. Claire Redfield since that time continued to search for her brother Chris, and infiltrates an Umbrella compound in hopes to find him, but was caught and imprisoned in Rockfort Island. However, she is released from her cell by the warden and discovers that the island has been contaminated by the T-Virus outbreak, turning prisoners and officers into zombies and monsters. She joins with a fellow inmate named Steve Burnside, and fight to escape the island.
Code: Veronica is the first Resident Evil game in the main series to use 3D backgrounds instead of the traditional pre-rendered ones. Despite this, the camera does not follow the player around, but swings between semi-fixed angles and the skyboxes are pre-rendered. However, two weapons in the game can be fired from the character's point of view. First person view mode is also available in the game's unlockable Battle Game minigame.
Gameplay remained largely unchanged from Resident Evil 3: Nemesis (which was developed in tandem with Code: Veronica); features such as explosive oil drums and a 180-degree turn having been carried over to this game, though the dodge feature was removed. Items from Resident Evil 2, such as upgradeable handgun parts and "side packs" to increase carrying capacity are included, as well as new weapons such as crossbow arrows mixed with gunpowder and anti-BOW rounds for the grenade launcher. A feature of Code: Veronica is the inclusion of various dual-wielding pistols, allowing the player to target two enemies at the same time. Some of the more subtle improvements include the addition of continues, allowing the player to retry a scene after a game over, and the ability to pick up and use a healing herb when the character's inventory is full.
Code: Veronica features two protagonists: Chris and Claire Redfield. In the first half of the game, players take control of Claire and in one part get to play as Steve Burnside. In the second half of the game, they pick up where they left off with Claire until they can play as Chris. When beating the game, players unlock Battle Mode, in which they can play as Chris, Claire and Steve, and when beating the mini-game in a certain time, they can unlock Claire in a sexier costume, and even Wesker. Steve is unlocked by obtaining the Luger Replica.