In Torpedo Alley the player commands a submarine in hostile waters, with one objective: sink as many enemy ships as possible. The sub is armed with a limited cache of torpedoes, and as enemy ships zig-zag across the periscope view, each launch must be timed accurately to intercept its target. If a ship makes it halfway across the screen without being sunk, it spots the player's sub and starts shooting, any damage will destroy some of the remaining torpedoes.

The only way to evade enemy fire is to dive deeper. When the sub is fully underwater, the 1st-person periscope screen is replaced with a side view, where the player maneuvers to avoid depth charges placed by the enemy: a single charge means certain death if it hits. When the sub is destroyed (or runs out of torpedoes) the game is over.