Dragon's Lair 3D: Return to the Lair follows the story of knight Dirk the Daring, who must rescue the kidnapped princess Daphne from the evil wizard Mordroc and his dragon Singe. The princess was taken from her castle, leaving only Dirk to navigate the treacherous traps and obstacles within.
The gameplay in Dragon's Lair 3D: Return to the Lair is an action platformer where players control Dirk as he battles enemies, jumps across platforms, solves puzzles, and upgrades his health and mana points. Dirk can also use a crossbow to fight off enemies and solve some of the challenges. Collecting Dragon Essences gives him new abilities.
The game retains its original cartoon-like style from the 1983 arcade version, with familiar locations and boss enemies returning.