The game centers around simultaneously controlling the Overlord and an army of goblin-like minions to traverse the 3D gameworld and defeat the seven heroes who slew the Overlord's predecessor, and who have since been corrupted by power. Each one represents one of the seven deadly sins.

There are four minion races, each of which have their own colour and abilities. Browns are melee fighters, blues can revive defeated minions and swim, reds throw fireballs at enemies, can put out fires and are immune to fire attacks, and greens backstab enemies and can clear poisonous gas and plants. Minions are summoned from the spawning pits found scattered throughout the game. The player needs to pay life-force, which can be gained by killing creatures, like large bugs, to summon minions. At the start of the game only five minions can be summoned at once; as the game progresses this can increase to a maximum of fifty. In addition to controlling minions, the player can sacrifice them at altars of blood and magic to restore the Overlord's health or mana. Once a forge is acquired, they can be used to imbue weapons and armour to increase the Overlord's abilities.

The player begins in an old ruined tower that has been plundered of its magical artifacts and acts as a central hub for the player. As the stolen tower objects are recovered, new rooms and spells become available for use, and the Overlord's maximum health and mana increase. The player also needs to recover the blue, green, and red minion hives to summon the respective minions. The player can customize the tower with a variety of visual items such as banners and statues; the available visual items differ depending on in-game actions. Armour and weapons can be purchased or improved in the forge. Most defeated enemy types appear as opponents in the dungeon, an arena where the Overlord can fight them again (excluding bosses such as heroes and one-of-a-kind beasts).

While the game claims that the Overlord is evil, the quests show him being more of an anti-hero. It also tracks how corrupt the Overlord is in accomplishing his goals. During the game the Overlord is tempted by each of the deadly sins while trying to kill their corresponding heroes. The player's choices will influence your corruption level, either raising or lowering it. Slaughtering inoffensive townsfolk, stealing gold and other activities can also increase the corruption level. The corruption level changes the way townsfolk treat the Overlord and will also change his appearance, a system similar to Fable. As corruption increases, the Overlord's armour will become more devilish with horns protruding out of the back, shoulders, elbows and knees and he will acquire a black aura. The corruption level also determines which game ending the player sees and which high-level spells they can cast.

The game offers several multiplayer modes. Slaughter pits two Overlords against each other in a head to head combat with potentially hundreds of minions. In Survival, two Overlords team up against large armies of enemies. Pillage is a competition in which two Overlords and their minions compete to see who can pillage and plunder the most gold in a selected amount of time. The Xbox 360 version provides voice chat over Xbox Live. In the PlayStation 3 version Raising Hell, the game features a mini-map on screen to help the player navigate through the game's world.