The basic gameplay is similar to most racing games. The player controls their car in order to get around the tracks as fast as possible. By collecting pickups they can obtain new properties, such as nitro boosts, oil slicks, projectiles and other weapons. The computer-controlled cars can also collect pickups. The game contains a total of 24 stages, of which 12 are simply reversed versions of the first twelve.
In Hot Wheels Extreme Racing the vehicles have the ability to transform into four different element types: land, water, air, and all-terrain. In transformation the body of the car stays normal while the side of the car "grows" wheels, wings or fins. The stages are divided into different parts, each designed for a specific vehicle. The parts are separated by a "transformation portal". When the players drive though such a portal the vehicle will change into another type.