Panic Space, or Famimaga Disk Vol. 2: Panic Space, is a puzzle game in which the goal is to reflect a laser to an exit panel in order to open the way to the next stage. The laser cannot hit any of the stage's surrounding wall: were it do so, it would cause the level to explode and the player to lose a life (from an initial allotment of five, though this can be increased while playing the game). Much of the time the various reflectors (which send the beam off at a 90 degree angle) and blocks (which simply stop the laser in its tracks) must be maneuvered into place before the laser should be tested on them.

The robotic protagonist also has access to three different power-ups. These appear on every level and quickly cycles through the three types - the player must grab it when it stops on the desired power-up. These include a stopwatch that extends the time the player has to complete the stage, a bomb can that can eliminate one block and is occasionally necessary to beat stages and a galaxy spiral that can be placed anywhere to temporarily stop the laser.