With Pengo as its clear inspiration, Planet Monsters pits you against three other monsters in a top-down, scrollable maze filled with blocks, obstacles, and enemies of varying types. The goal of each level is to defeat your opponents by pushing blocks in their path or using a weapon. The three weapon power-ups are the bomb, which destroys everything in a small radius, and the gun and bowl, which freeze enemies after four hits.

Other power-ups include alarm clocks that stop the action for a few seconds, and springs that let you jump over blocks and other obstacles. Bonus items such as gold ingots, casino chips, and amulets give you points. Additionally, collecting all the letters in the word "monsters" earns you a continue, while the word "extra" earns an additional life.

The game consists of eight words, each made up of five levels plus a boss battle. A password is provided at the end of each world. Up to four players can play simultaneously in one of two multiplayer modes, but each player must have their own copy of the game.