Research scientist Elspeth 'Doc' Holliday is dispatched to the town of Burkittsville by the Spookhouse, a fictional classified government agency charged with investigating paranormal occurrences. The story takes place in the year 1941, and with the exception of the opening section in the Spookhouse HQ, the game takes place over four days. Some enemies from Nocturne such as bat-like creatures and a werewolf also appear in the beginning of the game in the training session.

The Stranger reappears later in the game, on the fourth day, as the player's partner. Elspeth 'Doc' Holliday was a minor character in Nocturne, with several other characters from that game also appearing, including Master Khen Rigzin, Colonel Hapscomb, General Biggs, an unnamed secretary, Svetlana Lupescu, and The Stranger appearing at the start of the game. While Volume 1 is intended to take place within the fictional universe of the Blair Witch, the game is technically also a sequel to Nocturne, the game for which the trilogy's engine was originally developed.

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