Knytt Stories, the sequel to Knytt, is a jump-and-run platformer with a distinctive minimalist art style. It is set in the same universe as the previous game and incorporates the same gameplay mechanics. Unlike its predecessor, there is not a single scenario, but multiple stories divided over different game types such as Tutorial, Challenge (skill-based), Puzzle (focus on thinking), Maze (large and confusing levels), Environmental (no monsters, puzzles or challenges - just landscape), Playground (practice) or Misc (other levels). There are multiple difficulty levels that influence the items' placement.
The base game comes with a tutorial and a single scenario: The Machine. It focuses on Juni, one of the Knytts. The environment around her suddenly changes to a desolate wilderness. She receives a letter from Henna who tells her about a machine inside a cave, guarded by a monster. Juni needs to find a way inside and bring the beautiful landscape back. Gameplay is largely based on exploration and platform jumping. The Knytts can jump, climb and turn red when there are enemies nearby, but have no means of defence. New abilities include an umbrella to slowly float down or up, a double jump, hologram and a ghost mode to view invisible items and platforms. Not all of these are usually available right away. Players need to collect power-ups to activate them, even to jump higher or to climb walls. Some levels also have coloured keys that lead to secrets and there are more enemies than in the original game.
Players are encouraged to design their own stories with the included level editor. Soon after the release, Nicklas Nygren released a first expansion pack himself, with the levels A Strange Dream, An Underwater Adventure, Sky Flower and This Level Is Unfinished (its "unfinished" state being an actual part of the level design).