World 2 has two major areas- the overworld, and the underwater world. The overworld has several islands, two towns, and a whirlpool connecting it to the underwater world. Undersea tunnels connect World 2's islands. The underwater world has one town and the Undersea Palace. One of these islands has the ability to move around the sea like a ship.
The dragon king Ryu-O once ruled here, but he was deposed by his brother Sei-Ryu. At the time the party arrives here, Sei-Ryu occupies the Undersea Palace, and pirates make it dangerous for persons in the overworld to sail between the islands.