Xenon 2: Megablast is a vertically scrolling space shooter where you must navigate through levels filled with enemies that culminate in boss creatures. Destroying each group of enemies rewards you with cash, which can be used to purchase upgrades for your ship at Colin's Bargain Basement. Upgrades can also be found during the levels.
The game's first part has an organic feel, while the second part introduces mechanical enemies. Some sections feature maze-like areas with dead-ends, causing your spaceship to scroll backwards when the down key is held.