The fourth major update to Phantasy Star Online 2 as well as the first major update for the Global version, Episode 4 introduces new enemies and environments, new classes and a wide array of several new features. The main new area of Episode 4 is the Planet Earth of the year 2028 AD. Set in a different universe from the Oracle Universe of the last three games, ARKS battle against the new enemy types known as the "Phantasm". Dealing with these threats, ARKS will battle across Japan and the USA as they confront the wide array of unique forms the Phantasm can take on. The Japanese version of Episode 4's brought with it several new features which were available during the launch of the Global version. The new class "Summoner" was introduced and several extra character customization options such as Layering Wear were introduced. Besides that, EPISODE 4 came with new expanded graphics settings which bring the PC version on-par with its newly released PlayStation 4 version. Over on the Global version, the Episode 4 launch was the game's Steam release and the game transitioning from a North American exclusive game to a Global game available to 33 countries including Europe and Oceania. Several new features that were originally gated and general quality-of-life improvements were released in the Global version as part of the Episode 4 update including several new features introduced in the latest Japanese update. In addition to the new content, both versions benefited from new features such as the addition of Bonus Quests and Battle Arenas.

Four years after the events of EPISODE 3 and one year after the events of Phantasy Star Online 2 The Animation, the player is revived from stasis by the operator Xiera to accompany a new recruit named Hitsugi, a young boy, who is suspected to have ties to an internal invasion of fake ARKS members. During the mission, Hitsugi is attacked by a mysterious black mass; the player attempts to purify Hitsugi, but Hitsugi disappears prematurely. "Hitsugi" is revealed to be a high school girl from Earth playing the video game Phantasy Star Online 2, who finds a strange boy with her avatar's appearance in her room after the fiasco. Hitsugi names the boy "Aru". The player is subsequently sent to investigate Earth. Through trans-dimensional video feeds, it is discovered that Earth uses a parallel mutation of Photons called Ether that is primarily used as a method of high-speed data transmission, but also resonates with the emotions and fears of the general public to create monsters called Phantoms. The company ESC-A, who created Phantasy Star Online 2, is actually a front for a mysterious organization of Ether-sensitives known as Mother Cluster. Opposing them are the Earth Guides, Ether-sensitives lead by Ardem S. Sacred who fight back against Mother Cluster's Phantoms. The player, Hitsugi, and Hitsugi's brother Enga travel around the world to suppress Mother Cluster's efforts. During an attack on Las Vegas, Hitsgui is killed; this triggers Aru's Dark Falz powers to awaken, and he revives Hitsugi, who is captured and taken to Mother Cluster's home base on the Moon. Enga and the player rescue Hitsugi, but discover that Hitsugi was a ploy to allow Mother Cluster to attack the ARKS Ship. The player and Hitsugi return to the ARKS Ship and fend off Mother Cluster, but Mother, the leader of Mother Cluster, absorbs Aru and escapes. The heroes pursue Mother back to the Moon base, where she reveals that she is a failed Xion clone discarded by the Photoners and seeks vengeance against them. The heroes defeat Mother, causing her and Aru to separate, and she is redeemed by the heroes. However, Ardem appears and kills and absorbs Mother, revealing his true plan to usher in the next stage of humanity's evolution with Ether. The heroes travel to Yggdrasil and confront Ardem, who banishes the player back to the Oracle dimension and strips the heroes of their Ether abilities. Back on the ARKS Ship, Aru is revealed to have a fragment of Mother's consciousness remaining with him. Mother possesses Aru and returns to Earth with the player, restoring the heroes' powers in the process, and they defeat Ardem with their combined power.