The game's story (narrated by Peter Jason) follows the exploits of Jericho Cross, an outlaw-turned-vampire, and his employment in an ancient vampire-hunting order known as the Darkwatch (hence the game's title). After unwittingly releasing the Darkwatch's greatest enemy, a vampire lord named Lazarus Malkoth, Jericho is conscripted into the Darkwatch as an elite operative. Jericho, however, is slowly turning into a vampire himself, after being bitten by Lazarus. The game outlines either Jericho's struggle for humanity or his descent into darkness, depending on the player's actions.
The game begins in Arizona Territory in 1876 with Jericho attempting to rob a Darkwatch train that is transporting the captured Lazarus Malkoth to the Darkwatch Citadel, a frequently mentioned and often visited location in the game, and in doing so releases Lazarus into the West. In a seeming bit of mercy, Lazarus bites Jericho and gives him the curse of the vampire, causing him to slowly turn into one. The game continues with the introduction of Cassidy as well as the appearance of Shadow, Jericho's undead horse.
As the game progresses, Jericho finally makes his way to the Darkwatch Citadel, where he meets General Clay Cartwright, the current leader of the order. Cartwright puts him through Torture Maze, the Darkwatch initiation exercise which was designed as a test for Darkwatch Regulators, but Jericho gets a special version specially designed by Cartwright to kill him. When Jericho passes the test anyway, he begins to do missions for the Darkwatch. Missions include tasks ranging from fixing some of the damage he has caused to acquiring Darkwatch equipment, such as the Darklight Prism, a stone that allows vampires within its vicinity to use their powers and walk in sunlight. On some of his missions Jericho is accompanied by other Darkwatch forces including his new partner, a sultry and vicious temptress named Tala. Eventually, during their night of passion, Tala causes him to bite her and inherits some portion of his power, transforming herself into a half-vampire creature similar to him. She then betrays the Darkwatch from within, allowing the undead hordes to invade its headquarters.
A final showdown ensues with Lazarus, in which Jericho arises victorious, and a choice is given for him to side with either Cassidy or Tala. Either Jericho rids the west of the Curse of Lazarus, or he becomes the Curse; the player's choice determines how the game ends. If the character were to choose the good option, then the final fight will be against the vampiric Tala, and if they player chose to take Lazarus' curse for himself, then he must fight the ghost of Cassidy. The bad ending shows the now-monstrous Jericho killing Tala and riding into the night, while the good ending shows Cassidy's soul being released.