Dragon's Lair brings Dragon's Lair 's hero Dirk the Daring in a side-scrolling game where he must rescue Princess Daphne from the evil dragon Singe. To do so, Dirk will throw weapons at various enemies, including dragons, bats, snakes, and other foes. He will also jump and duck to avoid threats like falling bridges and spikes.
Dirk's goal is to complete each stage alive by reaching the end without taking damage. However, some stages feature an elevator that makes short stops, allowing Dirk to choose which platform to jump onto next. Taking the wrong platform can send him back to a previous stage. Dirk also has access to a bonus level, the Lizard King's throne room, where he can try to recover stolen gold.
Dirk has a limited life bar and will instantly die when taking damage from most threats. He also has a "candle bar" that can be used to light up dark areas and discover hidden items at specific locations. The game supports two-player mode, with the PAL version featuring faster gameplay and additional features.