Dredge sees the player control a small motorized fishing boat. The game takes place on a day–night cycle, where specific actions the player takes, such as sailing or fishing, push the clock forward. The player can look for fish to catch or underwater items to salvage at certain spots, where they play a short minigame to bring their catch on board. If the player stays out into the night, a panic meter starts to rise, with higher levels leading to hallucinations that change reality around the boat, creating hazards that may damage the player's vessel; however, some fish only become available during the night hours, forcing the player to stay out during these times. The waters around the archipelago also contain a number of sea monsters which can attack the player.
After docking at the main settlement or with a traveling merchant, players can sell their catch and buy new equipment for their boat such as brighter lights, faster engines, or better fishing equipment that expands the types of fish that can be caught. The boat has a predetermined amount of space on board, and the player has to choose which gear to fit inside along with space for their catch; however, players can upgrade their boat, expanding its capacity and resilience to damage. At other docks scattered around the archipelago, the player can also accept side quests, completing tasks for the residents of the islands to earn rewards, as well as stop and rest which decreases panic and quickly advances time for the player.