The gameplay is reminiscent of that of Power Stone and the Super Smash Bros. series. The player's main goal is to be the last man standing. One of the game objectives is to get the Shen Gong Wu. The Shen Gong Wu require the use of "Chi Energy" from the player.
There are six playable characters in the game: Omi, Raimundo Pedrosa, Kimiko Tohomiko, Clay Bailey, Jack Spicer and Chase Young, the latter two of which must be unlocked first. When Xiaolin Showdowns take place, the competitors get transported to an arena where they face off in a random mini-game. Master Fung appears in some parts of the game, giving tips for the player. Players can use Shen Gong Wu to aid them in battle. The player uses an in-game currency called "blessing coins" to buy Wu.