Unlike the previous games, Fatal Frame III mainly takes place in the protagonists' dreams. While the main protagonist is awake, however, the player has the freedom to explore her home.
The game focuses on Rei Kurosawa, a photographer who has recently lost her fiancé, Yuu Asou, in a tragic accident. Rei sees Yuu while taking photos of an old manor, however, and decides to follow him. In doing so, she falls under the curse of manor, where survivors of a disaster are tormented in their sleep by the ghosts of the dead.