The game takes place in a real-time three-dimensional fantasy landscape. As such it has drawn comparison with The Elder Scrolls IV: Oblivion.

Much like in Oblivion and Gothic 3, the gameplay is non-linear. The player is free to explore the game world, accepting side quests at will. There is however, a core quest, centering around rescuing the protagonist's sister, who is being held for ransom by mysterious forces who are scheming to open the tomb of Aziraal, the god of fire.

The game does not utilize fixed character classes like other role-playing games. As the character gains experience and levels, it is possible to invest gained Attribute Points into any attribute, leading to a variety of game play styles and approaches.

The world in which the game takes place is called Antaloor. While traveling through the game the player will encounter new teleports, caves, villages, and other locations, and these travels are recorded by the in-game mini-map. Teleports allow rapid travel between explored regions. Horses are available for the player to ride as well as other animals/creatures, though a number of commentators have lamented the clumsy controls when mounted.

Death in the game leads to resurrection at a nearby shrine; these shrines are distributed across the game world, and also replenish health when the player comes in sufficient proximity.
There are various creatures in Two Worlds. Unlike other CRPGs with wilderness areas, enemies will not respawn, although most areas are densely populated.

Beyond the main quest there is no set storyline to follow, the player is free to choose to complete the quests of his/her liking, and explore at will. The player may choose to act as a righteous hero and be honored amongst the population, or devilishly evil and feared, through reputation gained by completing certain quests. However, the path chosen will have consequences on the outcome of the game.