The Last Remnant is set in a fictional world featuring a number of distinct humanoid races; the Mitras, most human in appearance, the Yamas, strong fish-like people, the Qsitis, small reptilians, and the Sovannis, feline people with four arms. The story of the game revolves around "remnants", mysterious and coveted ancient artifacts of varying shapes and sizes which possess magic powers and which have been the cause of several wars throughout the game's history. As Remnants come in varying forms, all cities throughout the world have one that their ruler is bound to that assist to govern and bring peace to their assigned realm.

For example, Athlum has the Valeria Heart; a gigantic sword set in the middle of the Town Square. It governs courage and gives all those it surrounds the strength to stand up for their rights. David, the ruler of Athlum also is bound to the Gae Bolg; a weapon Remnant that is shaped like a cannon and can deliver devastating effects on the battlefield.

Eight cities have been revealed for the world of The Last Remnant which are Athlum, Balterossa, Celepaleis, Royotia, Melphina, Nagapur, Baaluk, and Elysion. They all have their own monumental Remnants. The ending of the game is somewhat questioned on whether or not the protagonist, Rush Sykes, survived at the end of the game, but after the game's credits Rush is heard talking to someone (most likely The Conqueror); the dialog says: "What will you do now?" Rush answers with "What do you think, I'm going back, they're waiting for me," somewhat revealing that Rush survived at the end of the game, although the current location of Rush and The Conqueror is unknown (possibly due to the screen being pitch black). It has been speculated that this may be a setup for a sequel.