Continuing the eternally retold tale of souls and swords, Soulcalibur IV is once again the story of the swords Soul Edge and Soul Calibur and those who want to have or destroy them. The swords are on the fast-track to resurrect an ancient king, and only the player can stop him from unleashing his ambiguous evil upon the world.

Soulcalibur IV continues the series' 3D blade fighting game play, with a few enhancements. The ability to break your opponent's defences from the first game finally returns in the form of destructible armour. Corresponding to the game's high, middle and low attacks, armour will weaken in these areas the more the player guards against attacks until the armour finally shatters. Also new is a Soul Gauge, which measures green-to-red how much a player has defended. Pushing the gauge beyond red causes a Soul Crush, which will create the opportunity for the opponent to do a character-unique one-shot kill called a Critical Finish.

Most of the regular cast returns for this bout with the addition of several new characters, the most publicized of which are Yoda on the Xbox 360, Darth Vader on the PlayStation 3, and Darth Vader's Apprentice on both consoles. All three characters have force powers that make use of an additional force meter that limits how often the powers can be used. Use beyond the meter will instead start draining the life of the character. Also new is Hilde, an armour-clad woman defending her homeland against the forces of the Soul Edge with a long pole-arm and shortsword. The final boss Algol is also a playable character, wielding the Soul Edge as one hand and the Soul Calibur as the other, as well as wreaking havoc with his teleporting chair. In addition, five "bonus" characters, each specially designed by a Japanese artist are included that recycle the move lists from the a-list characters.

The regular Story, Arcade, Training and Versus modes are still present, but Soulcalibur III's Chronicles of the Sword is supplanted with a new endurance-style campaign called Tower of Lost Souls. Players Ascend, and then Descend the tower by fighting waves of enemies, unlocking new items along the way by achieving certain conditions such as no ring outs or taking no damage. The versus mode is available in both regular and special varieties, the former enforcing only baseline characters while the latter allowing the use of customized skill sets and equipment. New to the series are online modes allowing you to play on the Internet with other players. Both ranked and unranked matches are available in the same regular and special modes as versus.

New characters and items are unlocked by spending Gold that is earned in the online or single-player modes, with some characters only unlocked by defeating them in the single-player modes. Gold can also be spent in the museum to unlock artwork.

Also returning from Soulcalibur III is the create-a-character feature that allows you to create your own custom fighter that can be used in all of the game modes. The selection of parts for characters is greatly expanded upon from Soulcalibur III, and it is also now possible to customize the equipment of the stock characters with the exception of the force users, the final boss Algol and the five "bonus" characters. Unlike the previous game equipment is now more than aesthetic, granting boosts or penalties to HP, defence, attack and various skill points. The skill points can be used to equip new skills that provide abilities such as Auto-Counter, Anti-Ring Out, and boosting stats when the Soul Gauge is low.