After two worldwide annual fighting tournaments, KOF has become a international phenomenon that's grabbed the attention of many powerful sponsors. Nine teams of three are competing for the KOF title, among them are faces old and new to the series. Takuma and Heidern have stepped down from their respective teams, with younger blood, Yuri and Leona, taking their places. Geese Howard, the Big Bad of Fatal Fury, decides to join with fellow villains Wolfgang Krauser and Mr. Big to form Team Boss. Iori Yagami is back forming a team with Rugal's former secretaries, Mature and Vice, and he continues to have a bone to pick with The Hero, Kyo Kusanagi. The tournament host this time around is a beautiful yet mysterious woman named Chizuru Kagura, who seems to have a connection to both Kyo and Iori's clans and warns about the upcoming rebirth of the Orochi.
KOF '96 is a huge turning point for the series. New systems are introduced, many replacing the old ones. An official Story Arc (the Orochi Saga) started to take place, encompassing multiple installments. In other words, this is the first step toward the KOF we know and love today.
The concept of the Dash and the Emergency Evasion roll was first introduced, as well as the Tech Grab (used to deflect the normal grab) and the Air Guard. Countering your opponent with a special move send them flying, opening a chance for extra Air Combo. Maxing out your power gauge, now called the MAX Mode, grants extra attack power and access to Desperation Moves ("DM" for short) as usual, but you can Guard Cancel as a reversal while blocking the opponent's attack, activating the evasive roll to ambush them. Some characters have more than one DM, and when you're both in the MAX Mode and on low health, using your DMs unleashes a stronger version of them, instead of just a recycled same DM with more damage.
It was ported to the PlayStation and the Sega Saturn, and the Game Boy port was released as The King of Fighters: Heat of Battle, adding Takuma in his Mr. Karate persona, as well as alternate versions of Iori, Leona and Chizuru.
- Team Japan: Still comprised of Kyo Kusanagi, Benimaru Nikaido and Goro Daimon, however Kyo's moveset has been completely revamped into a more melee-based style, following a loss against a mysterious wind-using challenger...
- Team Fatal Fury: Still comprised of Terry Bogard, Andy Bogard and Joe Higashi.
- Team Art of Fighting: Kyokugenryu disciples Ryo Sakazaki and Robert Garcia return; however Takuma decides to pass on this tournament, entrusting his daughter and Ryo's sister Yuri Sakazaki to join the team in his stead.
- Team Ikari: The Ikari Warriors commander Heidern also passes on this tournament, entrusting his adopted daughter Leona to continue their mission in the field alongside Ralf Jones and Clark Still.
- Team Psycho Soldier: Once again comprised of Athena Asamiya, Sie Kensou and their master Chin Gentsai.
- Team Women Fighters: With Yuri choosing to team up with her brother, King and Mai Shiranui instead recruit Kasumi Todoh into their ranks, who has something of a score to settle with the Kyokugenryu dojo.
- Team Korean Justice: Kim Kaphwan returns to the tournament, with Chang Koehan and Choi Bounge in tow.
- Team Yagami: Disappointed with his team's performance last year, Iori Yagami chooses to enter alongside Rugal's former secretaries, Mature and Vice.
- Mid Boss 1: Team Boss, comprised of Geese Howard, his half-brother Wolfgang Krauser, and fellow crime lord Mr. Big.
- Mid Boss 2: Chizuru Kagura, the tournament's sponsor who used KOF as a ruse to recruit strong warriors for the coming battle against Orochi.
- Final Boss: Goenitz, one of the Hakkeshunote who was essentially just acting as an envoy and a preview of the much bigger threat to come.
- Special Team: Team Sacred Treasures: While not an official team, the canon ending to the game is shown if you pick Kyo, Iori, and Chizuru on the same team.
This work shows examples of:
- All There in the Manual: Kyo's shift from a Shoto Clone into a rekka-based combo character is explained in Team Japan's Team Story, where Kyo was defeated prior to the tournament by Goenitz, inspiring him to learn new moves that would be able to defeat him. This is especially noticeable in his team's ending, where upon encounter Goenitz Kyo recognizes him as the one who defeated him before, something that was only ever said in the Team Story.
- Actionized Sequel: With the introduciton of new techniques like the dash and the evasive roll, which lets you easily close the distance to your opponent, KOF '96 favors the offensive style over the defensive.
- Adaptation Expansion: The Game Boy port, The King of Fighters: Heat of Battle, adds Mr. Karate (Takuma) as a secret playable character, who was replaced by Yuri in the Neo Geo KOF '96.
- Ascended Glitch: In KOF '94 and '95, some characters could use their DM in air. While this glitch was removed in this game, Kim's Hou'ou Kyaku can still be performed this way, now with unique startup animation.
- Battle Intro: For the first in the series, certain characters have unique intro quotes. Terry and Andy swear their revenge against Geese, Clark and Ralf strike the "Cross Changer" pose (from Choujin Sentai Jetman) together, and Kyo and Iori taunt each other. Later installments would add a lot more of these.
- The Cameo:
- The Women Fighters Team stage has Ryuhaku Todoh appear if his daughter is the current fighter, and has unique reactions whenever she wins or loses.
- The Fatal Fury stage features characters from the series, with Jubei Yamada laying on a chair, Tung Fu Rue and Sokaku Mochizuki standing on a roof, and Blue Mary cheering for the fighters.
- The Boss Team stage has Geese's right-hand men, Billy Kane, Ripper and Hopper. Billy was removed when this stage was added in KOF '98 UM, as he is a playable character in it.
- Cerebus Retcon: Rugal was a Generic Doomsday Villain who got himself killed from his power of unknown source. KOF '96 reveals it's a result of Evil Versus Evil, as that was the Orochi power Goenitz gave him in exchange of his left eye, knowing that it'll kill Rugal because anyone who isn't from the Orochi bloodline has no control over it.
- The Computer Is a Cheating Bastard: Goenitz in KOF '96 can use his DMs without any restriction, regardless of whether he fills his Power Gauge or not. Getting into the MAX Mode or being on low health boost their total damage even further.
- Early-Installment Weirdness: KOF '96 is the first to have the evasive roll. However, when your joystick is on neutral, it'll send you backward, instead of going forward like in any other games.
- Early-Bird Cameo: If you pick members of the Three Sacred Treasures (Iori, Chizuru, and Kyo), the mid-boss is replaced by Chizuru's sister (who still looks like and uses the same graphics of Kagura Chizuru). She's not named in this game, but her official introduction in KOF 2003 reveals it's Maki Chizuru.
- Game-Breaking Bug: This is the first KOF to be famous for the "TASK OVER" freeze bug, triggered by too many sprites at once.
- Greater-Scope Villain: Goenitz is revealed to be the one who granted Rugal Bernstein, the previous Big Bad, his Orochi powers.
- Leitmotif: A first for the series, KOF '96 gives the character exclusive theme to non-boss characters, as each member from the '96 Boss Team has unique stage music. If you're playing against them in the arcade mode, the background music will change accordingly whenever you beat each of them.
- Mechanically Unusual Fighter: In this game, Goro and Clark have access to both the Emergency Evasion roll and the evasion dodge, something no other characters (including themselves) can do in the entire main series.
- Myth Arc: This is the first game that hints at "Three Sacred Treasures," a mystery around the three ancient clans that vowed to fight against the God of Evil Orochi. The Orochi Saga reveals Kyo, Iori, and Chizuru are their current successors, and Chizuru insists they put their differences aside to prevent the imminent resurrection of Orochi. Even after the Orochi Saga, their history would be revisited in the Tales of Ash (KOF 2003-XIII), and again in the arc starting in KOF XIV.
- Mythology Gag: Robert's new design in this game comes straight out of Art of Fighting 3, which was released earlier the same year.
- Most characters who could fire an energy attack, like Terry and Ryo, can no longer spam it, as they now only travels a little before disappearing. Even newcomers like Geese and Mr. Big got their moves like this.
- KOF '96 adds Guard Crush. Blocking too many hits will forcefully disable your character's defense stance, so you can no longer block forever without some risk.
- Real-Place Background: The Korea stage is a 1:1 replica of Hwahongmun Gate, the north water gate of Hwaseong Fortress located in Suwon city. Compare the real-life location and the KOF version◊, and it's clear they're one and the same.
- KOF '94 and '95 were mostly derivative of SNK's bigger fighting games, borrowing gameplay elements from them. KOF '96 was the first real installment to move out of their shadow and become its own beast, introducing systems not in any of previous SNK franchises. Examples include the Dash, replacing the quick step, and the Emergency Evasion roll, replacing the evasion dodge.
- KOF '96 is also the first game to build on its own unique continuity separate from other SNK games, instead of just a Crisis Crossover with some original characters. A Story Arc named "the Orochi Saga" was announced, retroactively integrating KOF '94 and '95, and would continue on KOF '97, the arc finale.
- Sliding Scale of Gameplay and Story Integration: On "Natural Integration" level for how teammates on the side will help you. KOF '96 expands the "Mood" system for how your teammates will act when you call them for assistance. If said teammate isn't on friendly term with your current fighter, there's a 50-50 chance they'll help you or not, or if they really don't like it, they won't help you at all. Examples include Terry refusing to help Geese, or Iori not helping anyone except his canonical team. This system would be in all future Orochi Saga games, but removed in KOF '99, as the teammates were removed from the side in it.
- Trash the Set: Goenitz demolishes the KOF stadium (where you fought Chizuru, previously) before initiating the final battle against him. You can still see the damage being done afterward, as spectators try to protect themselves from the storm he created.
- Two Guys and a Girl: The new iteration of Team Ikari features the return of Ralf and Clark, as well as they're new member Leona, the sole woman of the team.
- Unnecessary Combat Roll: KOF '96 is the first game to introduce Emergency Evasion roll that works this way, althrough the motion varies between characters.
- Villain of Another Story: "Team Boss" features the Big Bads of past games from the KOF-verse including Geese Howard from Fatal Fury: King of Fighters, Wolfgang Krauser from Fatal Fury 2, and Mr. Big from Art of Fighting.