Xenon 2: Megablast is a vertically scrolling spaceshooter where you must navigate through several levels filled with waves of enemies that all culminate in a level boss creature. Each group of enemies you destroy earns you cash rewards, and you occasionally enter Colin's Bargain Basement to spend this cash on upgrades for your ship, such as better weapons, speed boosts, and health improvements.
The game begins with an organic feel, while the second half features mechanical enemies. The game also includes maze-like sections with dead-ends, where your spaceship will scroll backwards when you press the down key repeatedly.