CarnEvil is an arcade game that is played with a light gun. In this horror-themed rail shooter, you play a nameless protagonist who leaves a spooky cemetery tour to investigate an urban legend involving one of the tombstones. The legend of the evil professor Ludwig von Tökkentäkker's undead carnival is revealed to be true when the protagonist places a golden token into the stone jester head on top of the professor's tombstone. This causes the head to come to life and raise CarnEvil from the ground, leaving the protagonist to face off against it's monsters and defeat Tökkentäkker.
The game is divided into four levels, with each stage being a different section of the carnival (Haunted House, Rickety Town, Freak Show and Big Top). The fourth and final level is unlocked after defeating the first 3 bosses in any order. The player progresses through the levels by shooting the various disturbing enemies (such as evil clowns, zombies and lab experiments) before they have a chance of hitting you. Powerups such as health and gun upgrades are picked up by shooting them.
The arcade machine is played through a pump-action shotgun controller attached to the cabinet. The shotgun can be reloaded by pumping the controller or shooting it off-screen.