The game is set in the Algol star system, which has three planets: Palma, Motavia, and Dezoris. King Lassic has become a cruel tyrant, and Alis sets out on a mission to avenge her brother and defeat him.

Phantasy Star is a role-playing game where Alis recruits Myau, Odin, and Noah, each with unique abilities. The party shares inventory and equipment. The game uses a top-down perspective in the overworld and first-person in dungeons and battles. Players can visit towns, buy equipment, talk to NPCs, and use vehicles to navigate.

Battles are turn-based with attacks, magic, items, or escape options. Dungeons are labyrinthine, filled with monsters, bosses, and treasures, some of which contain traps. Characters can level up to 30, improving skills and stats. If Alis dies, the game ends, but other party members can be revived. The party travels between planets with a passport, and players can always check status, manage items, and save via the menu.