Near the end of Fimbulwinter, Kratos and Atreus return home—fending off an ambush from a vengeful Freya—to find their wolf Fenrir in his final moments. Atreus' grief transforms him into a bear through his still-uncontrolled Giant and godly magic, briefly battling Kratos before returning to his senses. As prophesied in Atreus' dream three winters ago, Thor arrives with Odin, who proposes leaving them alone if Atreus abandons his secret search for Týr. Atreus admits he and Sindri have been searching for clues about Týr's whereabouts. Though angered at Atreus' secrecy, Kratos reluctantly agrees to help him and they rescue a pacifistic Týr in Svartalfheim. The group head to Gróa's shrine in Alfheim to understand the prophecy concerning Ragnarök and learn Gróa lied: only Asgard is fated to be destroyed while all other realms survive under a new champion, implied to be Atreus under the name Loki.
Throughout the game, players battle Norse mythological foes, with more enemy types than in the prior entry, including newer enemies, such as einherjar, wyverns, stalkers (centaur-like creatures with antlers), phantoms, human raiders, and nokkens, among many others. The developers also added more mini-bosses to give the game more variety. The player primarily controls the character Kratos in combo-based combat and puzzle game elements. Kratos' main weapons are a magical battle axe called the Leviathan Axe, and his signature double-chained blades, the Blades of Chaos. He also dons his original Guardian Shield, and utilizes hand-to-hand combat. The Leviathan Axe is infused with ice elemental magic. It can be thrown at enemies and magically summoned back to his hand, similar to Thor's hammer Mjölnir. The weapon can be thrown at environmental objects to trigger a damaging explosion, and freeze objects and some enemies in place for puzzle-solving until resummoned. The Blades of Chaos, infused with fire elemental magic, are a pair of blades attached to chains that can be swung around in various maneuvers. A new mechanic for Ragnarök is that the blades can be used like a grappling hook to traverse over chasms, and pick up objects to hurl at enemies. Kratos also obtains a new weapon called the Draupnir Spear, a close- and long-range attack spear that is infused with wind elemental magic and can make copies of itself; Kratos can throw multiple spears at an enemy then have them all explode at once. The spear is also used to traverse or unblock certain pathways. Each weapon has standard light and heavy attacks. They can be upgraded with runes to allow for magical runic attacks, with slots for a light and heavy magical attack, providing a variety of play style options. Additionally, a "Weapon Signature Move" ability was added, which unleashes a powerful magical attack for the equipped weapon. Another added mechanic is that if on a higher ledge, the player can leap down to perform a powerful weapon attack on enemies below.