Neverending Nightmares revolves around Thomas Smith, a young man who is suffering from a seemingly-endless string of nightmares (hence the title). Another character, Gabby, is introduced as Thomas’ little sister, and frequently appears in his nightmares, occasionally changing roles. At turning points in the game, Thomas finds Gabby dead in various situations; Thomas himself also dies in his nightmares, sometimes by his own hand, though this only leads him to wake up in yet another nightmare.
Throughout the game, which is implied to be set in the late 1800s, Thomas must explore various locations in his nightmares. These include a mansion, a cemetery, an insane asylum, a forest, and a hospital.