Sonic Championship is a 3D fighting game, featuring characters from the Sonic the Hedgehog franchise. The background story is that Doctor Eggman built the Death Egg II, a new version of his facility that appeared in previous games. Stopping him requires Chaos Emeralds, and various individuals including heroes like Sonic the Hedgehog and Miles "Tails" Prower participate in a fighting tournament to gather them. In total there are eight playable characters (nine in later console releases) and two bosses (Metal Sonic and Doctor Eggman).

Gameplay is mostly typical for a versus fighter, it is a one-on-one fight on a best two out of three basis. Players use jumps, punches, kicks and special weapons. Bean the Dynamite for example, a duck-like character who makes his debut in the Sonic universe, uses bombs. Blocking is done by making use of a limited supply of barriers. The whole action is illustrated in a comical fashion though, like one would expect from a Sonic game. A round is won when a player managed to deplete an opponent's health, unless the timer runs out, in which case the character with the most energy left is the winner. Environments are 3D closed arenas, but the gameplay is mostly 2D, allowing limited sidestep maneuvers.