400 Years ago, a war between the Eastern Continent and the Western Wizard Army destroyed the world as a great power was unleashed. Time has passed and in present day, the power-hungry General Flag has organized a ritual to awaken this power once more: the Dark Genie. Barely controlled by a spell, the Dark Genie once again breaks the world, beginning with the village of Norune. The only survivor of Norune is a boy named Toan, son of the great hero Ada. As Toan surveys the destruction, the Spirit King appears and tells him that all is not lost; pieces of the world, including buildings and people, have been sealed away in protective Atla spheres. Using a magic glove called the Atlamillia, Toan must resurrect the world and find the powers necessary to defeat the Dark Genie.

Dark Cloud is an action-RPG title, often compared to Soul Blazer, played from the 3rd person perspective. Toan must enter randomly generated dungeons where he will battle monsters and recover Atla spheres. Toan battles with a sword, which can be slashed directly in front of him or powered up for a stronger blow. During his travels, Toan encounters other characters who will offer to aid him and can be switched to during dungeons, with individual statistics and weapons. Items are also found and shared among the party, including restorative items, attack items and general power-ups. Each character has a thirst meter, which much be replenished or health will start to drain. Should a character lose all their health, they will fall in battle and be returned to town unless Stand-In powder is used, in which case that character is unavailable and control passes to another.

Toan is the only character able to collect Atla spheres which contain different items needed to restore the villages destroyed by the Dark Genie. Rebuilding is done outside the dungeon in a designated village area. Buildings can be placed down, rotated and moved as need be. They can also be upgraded with additional furniture and people (usually the owners of the building). As the dungeons are conquered and the area becomes more lifelike, treasure chests start appearing around the town and villagers often become friendlier. Some villagers have additional requests, such as being placed facing the east, for the placement of their homes.

Each character in Toan's party uses a unique weapon, but several different types of weapon under each category can be collected. As weapons are used, they gain Absorption (Abs). These Abs points are used as "experience" for the weapon and can upgrade the weapon's abilities. Each weapon features a number of "slots" to which power-up items can be attached, any items attached to slots will be absorbed when the weapon is upgraded. Each weapon has certain attributes which must be improved in order to "build up" to a different type of weapon. Additionally, any weapon reaching level 5 can be broken into a Synthsphere, an item containing 60% of its abilities, which can then be attached to slots on different weapons. In this manner, weapons can always be upgraded or used in the improvement of another weapon throughout the game. The game also features certain sequences where buttons must be pressed in the correct order and correct timing in order to progress.