SegaSonic the Hedgehog is an isometric platforming game with three characters who shares identical controls and abilities. The characters are controlled with one action button which lets the player perform a spin jump, and a trackball which is used to move the characters around. Each trackball and corresponding action button are color-coded, meaning the blue ones are for Sonic, red ones are for Mighty and yellow ones are for Ray. The premise of the game is to reach the end of an isometric course without dying. This objective is similar to other video games in the Sonic the Hedgehog series. Yet, it is also different in the sense that instead of a typical platforming game, the game is centered entirely around running as fast as possible on a linear course from a never-ending barrage of threats, including giant boulders, lava flows, rogue gears, falling stalactites, and other traps. When the player is hit by a dangerous obstacle or hazard, they lose health from the Health Gauge, which can be refilled by collecting Rings that found around the arena. Upon completing each level, the game tallies up how many Rings were grabbed. Extra points are also received if over half of the level's Rings were found. The game only has a few enemies and one boss that appears midway through the game. At the end of the final level, the player is given twenty seconds to escape from the self-destructing tower. Failure results in an instant Game Over.

Sonic, Ray and Mighty have been kidnapped by the evil Doctor Ivo "Eggman" Robotnik, who uses his large tank vehicle to do so. He takes them prisoners on Eggman Island: an island littered with traps and hazards that can be activated with the push of a button. Sonic, Ray and Mighty team up to escape the island, as the trio must survive the various hazards of the island and reach Eggman's Tower. As they arrive at the control room, Eggman presses a button that triggers a self-destruct sequence that will destroy the entire island. The trio manage to flee the island before the explosion. The evil doctor also escapes, but suddenly falls into the sea due to his Egg Mobile running out of fuel.