A Fisherman's Tale is a story of a fisherman living in a lighthouse on a small island split in four chapters plus brief prologue and epilogue. A storm on a horizon prompts the fisherman to head on top of the lighthouse and turn on the light to help nearby ships navigate. But getting to the top of the lighthouse is tricky and the entire story revolves about trying to reach it. The fisherman has a small model of a lighthouse and a figurine of himself in the main room, and at the same time he and his lighthouse are a model in an even bigger lighthouse which is a model in an even bigger lighthouse. Every object and character is connected to miniature and bigger model of it and everything moves simultaneously. Opening the door on a miniature model lighthouse will open it in every lighthouse. With this in mind, most of the puzzles are oriented toward that way of thinking (i.e. an anchor which is blocking the gate can be taken from a miniature model which will make an even bigger fisherman take the one blocking the door in the player's lifesize world).
Movement is done only by teleporting and two motion controllers are required, which in turn represent the fisherman's hands. Many objects may be out of reach, and since jumping and crouching isn't available, each hand can be extended and withdrawn with a press of a button. Various objects can be carried in hand, placed in their designated new place or tossed around. Each tossed object out of reach (or even withing the reach but in a new random place) isn't lost and re-spawns in its original position. The game mostly takes place inside the lighthouse, although some of the elements take place in the open sea on a fishing boat.