Like earlier entries in the Tony Hawk skateboarding series on the Game Boy Advance, Tony Hawk's Underground adapts the console title to the handheld platform using isometric graphics and polygonal characters.

The main game mode is story mode. Players create their own skater who in the beginning only knows a few basic tricks. By performing moves successfully, the skater's stats and number of known tricks will increase. The campaign consists of 10 large levels. Friendly characters standing around the neighborhood can be talked to and give tasks that usually have to be completed within a time limit: these include performing specific tricks or combos, finding certain items or reaching high scores. Completing goals adds cash to the character's wallet, makes more areas of the level available to skate in, and unlocks levels and pro skaters. Crashing deducts from the characters health' bar. When it reaches zero, the skater is moved to the beginning of the level. Wearing protective gear (helmets and knee pads) reduces the impact of crashes, and eating food items replenishes the health meter. Both are available in the skate shop in exchange for cash.

Further modes include arcade mode, which hearkens back to the classic Tony Hawk games: after picking a pro skater, a two-minute-run of a level begins, in which a number of goals must be completed. While arcade and story modes use the same levels, the goals are completely different. The free skate mode allows practicing unlocked levels without a time limit. Multiplayer modes include two hot-seat games: a HORSE contest and a high score competition. Available only via the link cable is the cart racing mode, where players race each other in shopping carts à la Jackass.

Gameplay and controls remain the same from previous entries in the series. An entirely new option allows the skater to step off the board and run around on foot: thus a quick 'run-out' is a new trick to increase the combo multiplier.