The game takes place near the end of Redemption's story, after the the defeat of Dutch van der Linde, during the "home-period" when John Marston returns to his family on his ranch in Beecher's Hope. An infectious outbreak of unknown origin is rumored amongst the people on the frontier of being caused by Seth Briars stealing the glass eye from Tumbleweed, Nigel West Dickens with his miracle tonic, or the Mexicans by bringing the disease over the border from Nuevo Paraiso.
In Undead Nightmare, John is in his house with Abigail and Jack. They are all talking about general things, like a book Jack is reading, however they mention that Uncle hasn't returned from what he was doing yet. John however states that because of the storm, Uncle has probably went to a dry place nearby and will stay there until the storm subsides. Uncle is then seen, although he is undead. Uncle tries to attack them, and John fights back. John heads for his gun in a nearby shed, however when he comes back Uncle already bit Abigail in the neck. John shoots Uncle in the head and tends to Abigail. Jack comes outside and tries to help his mother. However, Abigail turns into a zombie and bites Jack, infecting him, meanwhile John runs for his lasso, then he hogties both of them, and after giving them both a plate of food, he leaves them in the house and sets out to find a cure.
John then goes to Blackwater, where he finds Professor MacDougal, who returned from Yale to document the undead infestation. Macdougal is killed by an infected Nastas however, and John is forced to clear out Blackwater and look for more survivors. He finds a family on a roof, killing undead, however they are no help. John finds another group of survivors, who all give him multiple theories they suspect caused the plague, including a "Snake oil merchant" and a "Freak with a glass eye".
If John goes to Tanner's Reach, he will meet a hunter who claims to have just shot a Sasquatch, starting "The Birth of the Conservation Movement" mission, which has John try to hunt down six Sasquatches. After finding the sixth one however, John learns that his hunting has doomed the Sasquatches and the last one there asks John to kill him because his family is dead. John can choose to kill him or not.
If John decides to follow the "Snake Oil Merchant" lead, they will find Nigel West Dickens in Fort Mercer, trying to sell his elixir as a cure and repellent to the plague. John however forces Nigel to stop selling it, and Nigel complies and hands out free samples to see if they like it. The elixir however is actually more of a bait, and the drinker is killed by undead soon after drinking. Nigel is disappointed and asks John to find him five Desert Sage and five Violet Snowdrop to see if he can make a better cure. He also gives John some of the elixir to use as bait. After John finds the flowers, Nigel makes a phosphorus bullet coating with it, and then asks John to find him some old parts he needs. After John finds the parts, Nigel uses it for a Blunderbuss, telling John that it is the ideal weapon for undead killing. He also tells John that he is trying to get to Mexico and should be in Solomon's Folly in a few days. At Solomon's Folly, John finds out that all paths to Mexico are blocked, and that Nigel has no way of getting to Mexico. However, Nigel tells John that if he gets a US Army uniform from some deserters, he can sneak on a train manned by the US Army that is headed to Mexico. Nigel goes off and John doesn't meet him again.
If John decides to follow the "Freak with a glass eye" lead, they will find Seth in The Old Bacchus Place, playing cards with an undead Moses Forth. John asks Seth if there's a cure to the plague, and Seth tells him to clear the graveyards. After John clears out 3 graveyards and goes back to Seth, Seth tells him that the cause of all this has something to do with the Aztecs, and tells him to head down for Mexico if he wants to cure the plague.
In MacFarlane's Ranch, John meets Bonnie MacFarlane, who tasks him with trying to find her father, Drew MacFarlane in the barn, although she tells him he has been in there for more than a day. John finds Drew in the barn, zombified. John is forced to kill Drew, and he goes to Bonnie and tells her what happened.
In Plainview, John finds D.S. MacKenna, who tells John to bring him a Retcher, because Mackenna desires to make a zombie movie. Once John does so however, Mackenna sets it and another undead loose, and they both proceed to attack Mackenna, who is turned undead. John then can kill all three of them.
In Armadillo, John meets Marshal Leigh Johnson, and Johnson asks John to find Eli and Jonah, who have been missing for a few hours. John finds Eli eating Jonah, and they both attack John. John then has to kill them both, and tell Johnson the news. Johnson also gives John a Sawed-off Shotgun.
In Fort Mercer, John sees an Army Captain posting up a missing persons poster for Millicent Waterbury. The Captain asks John to find the girl, and John finds Millicent in Pleasance House, although undead are trying to attack her. After John saves Millicent, they head back to Fort Mercer and the Captain thanks John and tells him there's more missing persons if he wants to help them.
If John heads to the deserters, he finds them being attacked by undead, he can either help them and earn the uniform, or steal it and suffer the consequences. After John has the uniform, he can head to the train, where he finds the US Army being lightly hassled by undead. After John helps them clear it out, they heads to the border. At the border, the captain tells them all to get off and clear the roadblock. However, they are attacked by undead and the US Army retreats, leaving John to kill the undead. After he has dealt with them, John can man the train and smash through the roadblock into Mexico.
In Mexico, John finds that Mexico is actually in worse shape than America, and he heads to Las Hermanas, where he meets the Mother Superior. She tells John that other nuns are not as resourceful as her, and that he needs to head inside Las Hermanas and save the town. After doing so, Mother Superior thanks John and John asks her why the plague is happening. She tells John that she needs a normal Undead to really find out. After John brings her a normal Undead, Mother Superior tells John that she suspects evil, and she pours holy water on the undead, who is briefly bathed in blue flame, but is not killed. She asks John if he can clear out the Sepulcro graveyard for her, and she gives him Holy Water. After he returns, Mother Superior tells him that a woman told her that the cause of all this is because of something Abraham Reyes has done. John is then tasked with heading to Escalera and finding out what's really causing all this.
In Casa Madrugada, John meets Landon Ricketts, who is busy ridding the town of undead. Landon seems to be holding off all the undead by himself, and Landon tells John that if he can find something that attracts the undead, he can combine it with Dynamite and really kill the undead quick. After John brings Landon Undead Bait and Dynamite, Landon combines them and makes Boom Bait, after handing it to John, they say farewells and John leaves.
In Escalera, John finds a woman, who tells him that Abraham Reyes is up ahead, John finds Reyes, however, he is undead and is trying to kill a woman. After John kills Reyes, the woman tells John that the cause of all this is because Reyes' lust for invulnerability made him steal an ancient Aztec mask, and this is why the plague started. They take the mask to the crypt where Reyes found it, and after John places the mask back in the altar the women reveals herself to be Ayauhteotl, an Aztec goddess. This action causes the undead to be returned to normal, and John heads home to his family.
Upon heading back to Beecher's Hope, John finds that Abigail and Jack are fine, and they are happy again. Sometime later, John is dead, and in Escalera Seth is shown stealing the ancient mask, causing all dead, including John to return as undead. However, as John was buried with Holy Water, he returns as an undead with a man's soul, allowing the player to still play as him.