One of the earliest challenges at the start of development was designing a game around Wolverine, a character who was so powerful he was effectively unkillable. To make him vulnerable and to give the game a challenge, lead designer Haydn Dalton came up with a premise where Wolverine lost his healing factor:


The plot was then cleaned up by Marvel Comics writer Larry Hama.

According to producer Rob Letts and writer Larry Hama, they intended for this game to take place "very firmly in the comic universe". However, they admitted to "messing around with the chronology" in order to include Colossus, a character who had died in the comics at the time, so they could have him and Wolverine perform the Fastball Special comic book move in the game. As such, the game's story is considered by Marvel fans to be one of many that are non-canon or independent from the comics' main Earth-616 timeline.

Originally, the game began development under the name "X-Men: Wolverine's Revenge", but the title was changed in 2003 to "X2: Wolverine's Revenge" to promote the upcoming 2003 film "X2". Hugh Jackman's likeness was featured on the box art, but Jackman himself was not involved with the game and Wolverine's appearance in-game does not resemble him. On top of this, despite sharing the X2 name, the game does not adapt the film's plot and instead uses an original story by Marvel Comics writer Larry Hama. The only similarities to the film are Patrick Stewart reprising his role as Professor X from the film, and an alternate costume based on Wolverine's outfit in the film.

There was a cutscene with Spider-Man planned for the game, placed sometime before the Magneto boss fight. Rino Romano (reprising his role from Spider-Man Unlimited) had recorded his lines before being cut. The removed scene can be unlocked by collecting all the dog tags in the game.