Tokyo Xtreme Racer is a one or two player racing game based on illegal street racing around the streets of Tokyo. The game starts by giving the player $15000 so that they can buy their car. There are three types of car; Class A has the most powerful engines; Class B has mid range engines but are better balanced; and Class C cars lack power but have better handling. Needless to say the cash the payer starts with is sufficient for the lower cars in each group, players need to win cash if they are to upgrade.
The game modes include the Quest mode where the player tries to rise to the top by looking for other racers to challenge, Quick Race mode where the player starts on the road and races a random AI opponent, Time Attack mode where the player races around a course in Tokyo looking to set a new best time. The player can also Free Run anywhere in Tokyo or play Versus mode with another player.
Gameplay involves selecting a car, customising it, and then racing. Cars can be tuned, changed, and upgraded prior to each race. After each race the player can replay their race, save it to replay later, or just save the result. The game also features system configuration options, including the ability to customise the controller buttons.