Ehrgeiz was first released in the arcades by Namco. Squaresoft and Dream Factory had major roles in the development of the game. This is why you will see Cloud Strife and Tifa Lockheart as playable characters in the game. In many ways, the controls for the game are similar to Soul Edge and Soul Calibur.

The story behind the game is that the sword Ehrgeiz was discovered in a German castle. Embedded within the hilt was a stone (called Materia). Every year since the discovery of the sword, Ehrgeiz was awarded to the winner of a tournament where the world's greatest fighters gathered.

An underground terrorist organization, Red Scorpion, posing as an organization to protect ancient treasures, discovered some ruins in the Middle East. After some research, it was discovered that Ehrgeiz (more specifically, the Materia) was the key to unlocking the most powerful secrets and treasures that were once buried. If Red Scorpion obtained Ehrgeiz, the organization would be capable of world domination through the use of biological weapons and ancient technology.

Realizing this danger, three-time Ehrgeiz champion and current title holder Koji Masuda decides to withdraw from the current tournament. He then writes his daughter, Yoko Kishibojin, a letter stating that he is relinquishing his right to Ehrgeiz and instructs her to enter the tournament in hopes of winning the sword back so it can stay in the family.