LEGO The Hobbit is based on the first two films in The Hobbit movie trilogy: The Hobbit: An Unexpected Journey and The Hobbit: Desolation of Smaug. Like the other LEGO Tt games it is an adaptation of the franchise to the LEGO universe. It allows players to play through different scenes from the films and follow Bilbo Baggins as he is recruited by Gandalf to aid Thorin Oakenshield and his Company of Dwarves. Bilbo leaves the comforts of the Shire on a journey to help the Dwarves reclaim their lost Kingdom of Erebor within the Lonely Mountain. Many dangers and adventures await and unexpected discovery of a certain ring.

The game follows in the footsteps of LEGO The Lord of the Rings by ditching the hub world in favor of an open-world setting where the levels are started. The main gameplay is still based on fighting enemies. New features include the backpack as an improved inventory, a new buddy mechanic (also improved from LEGO The Lord of the Rings) and new resource collection in the form of loot. Similar to The LEGO Movie Videogame players collect different LEGO pieces while destroying the environments which can then be used in building mini-games to progress in the story and solve puzzles.