DJ Hero 2 follows from its predecessor in simulating the performance of a disc jockey mixing one or two songs using a special turntable controller. The controller, the same unit as shipped previously with DJ Hero, includes a rotatable turntable to use for recording scratching, three "stream" buttons to match notes from the two music tracks and an effects track, and a slider to control the crossfade between tracks. These actions are presented to the players through on-screen notation that scrolls in time with the music. Players score points by performing the actions correctly, but are not penalized otherwise. By successfully completing a consecutive set of actions, the player can increase their scoring multiplier up to 4x; the multiplier returns to 1x should they miss any actions. Certain marked sections, when played correctly, fill a "Euphoria" (the "Star Power" for this game) meter which can be unleashed using another button on the controller and will temporarily double the scoring. The player can also earn the ability to rewind a song by a few seconds by playing a long string of consecutive notes. They can rewind the song by quickly spinning the turntable in reverse; the rewind effect can be used to either correct a mistake or further boost one's scoring.
Small changes have been made in the turntable playback within DJ Hero 2: freestyle effects samples, previously based on game-wide preselected "effect packs", are mix-specific, and the game does not penalize the player for small variations in fast scratching sections as long as it follows the general beat of the song. Specially marked freestyle sections, previously limited to only added sample effects over the track, allow the player to freely mix between the two tracks, use their own scratch effects, or add effects hits while within these sections. The display for these freestyle sections shows marks where switching between the tracks would achieve a strong audio effect, and the player is graded on how well they hit these markers after the end of each mix.
In addition to using a turntable, players have the option to sing or rap to the mixes' lyrics, similar to vocal parts in current Guitar Hero or Rock Band games using a compatible microphone controller from most previous rhythm games. The game will score vocals based on the matching of pitch, beat and rhythm.
DJ Hero 2' features an improved single-player career mode called "Empire". Empire provides more structure for the player to proceed through the game than the simple set lists used in DJ Hero. Through Empire mode, the player works though a number of pre-determined setlists and boss battles (as described below) with the celebrity avatars and fictional DJ's at one of six different venues, earning stars that unlock additional venues to play at. Completing certain setlists or battles unlock new characters, outfits for those characters, and virtual turntable decks for the player. Five of these decks are "power decks" that slightly change the scoring mechanism or play style of the game; one increases the maximum multiple to 5x, while another one increases the rate that notes are displayed but increases the base scoring system.
The primary focus of DJ Hero 2 has been the social aspects, according to FreeStyleGames' creative director Jamie Jackson; as such, many of the games' new modes feature multiplayer considerations. The game supports the "Party Play" mode introduced in Guitar Hero 5, allowing players to jump into a song, alter the difficulty during gameplay, change between turntable and vocals, and leave at any time, while the game continues to run in a jukebox mode. Several new competitive modes engage two DJ players against each other; some modes have both DJs performing alongside each other but with competitive edges such as a "Checkpoint" race where each DJ attempts to earn the best score within a section of a song. DJ Battles see two DJ's performing call-and-response style along with open freestyle sections. The online mode includes a simple role-playing video game mechanic whereby participating and winning battles with other players earns the player DJ Points that lead to level increases and additional perks.
The game does not include "DJ vs Guitar" mode that was featured in DJ Hero, where a second player could use a compatible guitar controller to play alongside the DJ player.