"It has been a while since the existence of the mysterious secret syndicate NESTS was brought to light. Since then, however, their presence still remains a mystery and they've kept their activities well under wraps.
Meanwhile, in contrast to NESTS seeming lack of action, an increase in terrorist activities throughout the world has been taking place. Heidern and his band of mercenaries have determined that these events are the work of K' and Maxima.
Heidern and his band quickly begin pursuit of these two, but just as they begin their efforts, the invitations for the latest KOF tournament are sent....!
The fighters ready themselves for the tournament to begin in various venues throughout the world. Most remarkable among the invited teams is one in which K' and Maxima are listed as members! Moreover, NESTS whip into the second phase of their project, as if summoned into action by the two "terrorists."
Is the beginning of NESTS's activities a mere coincidence? Or, could it be...?
Once again a feeling of impending conflict stifles the air, and the curtain on the latest King of Fighters is about to rise...!!!"
After the KOF 1999 tournament, the commander of the Ikari Warriors, Heidern, is determined to figure out the objective of the NESTS cartel so that he can stop them from achieving their ruthless ambition. A fellow commander and long-time friend of Heidern, named Ling, tells the veteran fighter that K' and Maxima may hold the key to locating the whereabouts of the mysterious organization. Using this information, Heidern decides to focus his efforts on finding the duo so that they can be captured and interrogated for information. Meanwhile, the NESTS cartel sends Kula Diamond to investigate the tournament.
At the finals of the tournament, the Hero Team are taken to an underground mansion via a hidden elevator and are greeted by a mysterious but sinister-looking man. At the same time, Ling and a couple of his associates suddenly betray Heidern. In the underground mansion, the man known as Zero reveal he had the real Ling killed and replaced with a clone in disguise. Also, Zero tells the fighters that he was a former member of NESTS with plans to eliminate the cartel by using a powerful space-based weapon known as the Zero Cannon. To demonstrate his power, Zero fires a warm-up shot of the cannon towards Earth and wipes a city off the map.
The fighters battle against Zero not realizing that their energy powers the Zero Cannon. Zero is defeated and tries to fire the cannon again but it explodes. When K' and Maxima explore the ruined city above them, Whip appears and joins their cause to defeat NESTS.