Dragon Spirit is a vertically scrolling shoot-em-up for the PC Engine console in 1987, where Princess Alicia of the kingdom of Mitgult is kidnapped by the monster Zawell. It's now up to the heroic warrior Amul to transform himself into a blue dragon and go and rescue the princess. Dragon Spirit consists of nine stages. Players fly around and destroy everything in their path, with action taking place on two planes, both in the sky (where the dragon is flying) and on the ground. The dragon has two different kinds of attacks: fire that shoots up the screen, and fire that drops to hit a place on the ground in front of the dragon. Enemies exist both in the air and on the ground, and some can fly up from the ground to the sky.
Players can pick up power-ups or upgrades that will help them in their fight. Upgrades include extra heads on the dragon, health, faster shots, and more. At the end of each stage is a boss that needs to be defeated. Having good upgrades that are not lost from being hit before reaching the bosses will help.
The NES version presents an altered story and an additional gameplay mode, with "A New Legend" as its subtitle. In this version, Zawell is already defeated, and King Amul and his now wife Queen Alicia have two children named Iris (a princess) and Lace (a prince). A new evil named Galda has decided to attack the Earth, taking Iris captive and leaving Lace to rescue her.
The NES version also adds a new initial stage. If the player survives it, the game continues in a "Blue Dragon" mode much like the original arcade game. If the player fails to clear this initial stage in one life, an easy mode called "Gold Dragon" begins, skipping about half the game's stages, giving the player extra hit points, and features a different ending.
The TurboGrafx-16 version has seventh and eighth stage changes compared to other versions. The underwater and dark-themed stages were replaced with castle interior-themed stages.