Set in a fictional German town named Lebensbaum (Life's Tree), Shadow of Memories revolves around a 22-year-old man named Eike Kusch, who dies in the beginning of the game from being stabbed after leaving a small diner. However, he is resurrected by Homunculus (voiced by Charles Martinet in English), a djinn or genie, who offers to send him back in time to prevent his death and gives him the time-traveling digipad. Eike explores four eras—2001, 1980, 1902 and 1580—as he attempts to unmask his killer and figure out a way of stopping his own murder at various points in the present. Along the way he encounters several characters: Dana, a modern-day waitress whom he accidentally brings back to the year 1580 and loses; the present-day fortune teller, who tells Eike the hour of his death; Eckart Brum, the curator of a private art museum who lost his wife and infant daughter in a shooting; Dr. Wolfgang Wagner, an alchemist living in 1580 with his wife, Helena, and their two children, Hugo and Margarette; and Alfred Brum, the great-grandfather of Eckart.
Given a red stone by Dana, Eike follows the Homunculus' instructions to give the stone to Wagner. Time-traveling ten days later, Eike discovers that the result of Wagner's experiment destroyed the lab and caused Hugo, already upset by his mother's death due to a lingering illness, to build a time machine and track Eike down with the intent of killing him. Depending on the player's actions, Hugo holds either Margarette or Dana hostage in the present and plans to use the red stone, revealed to be the Philosopher's stone, to resurrect his mother.