The primary objective of the game remains unchanged from previous Sonic titles. The player must finish each level in under ten minutes and defeat Dr. Robotnik's badniks along the way. Rings still constitute the player's life energy and can be collected to gain lives or enter special stages.

The levels are divided into 5 worlds, each one consisting of 5 different acts in which every 2 stages/acts played, change to a specific time of the day (morning, midday, afternoon, evening and night). At the end of act 5 the player confronts Dr. Robotnik in one of his contraptions.

The most fundamental change in Knuckles' Chaotix (and what eventually became one of the most criticized features of the game) involves the special ring force bond between characters. In earlier Sonic games, two-player mode would consist either of a traditional split screen race or a joint single player effort with Tails as a secondary character. In the latter case, this meant that Tails could move off screen and get lost for a few seconds until he returned to Sonic.

In Knuckles' Chaotix however, both players are at all times connected on one single screen while neither player acts as the dominant force to move the game forward. Besides the staple of traditional Sonic moves and individual abilities this means some new tricks can be executed with the elastic force of the ring bond. For example, player 1 can hold his position while player 2 runs forward and stretches the bond to gain maximum speed. In mid-air the bond can be used to generate an upward momentum. Additionally, players can toss each other toward platforms or use the call-button to reunite (at a cost of ten rings, which meant that for the first and only time the ring count could dip below zero in a Sonic game).

Recently, some elements of the game have received new life with Espio, Vector, and Charmy returning to the series as of Sonic Heroes. Also, the concept of a player controlling two characters is reused for Sonic Advance 3.