Colt's Wild West Shootout is a first person rail shooter where the player the player takes control of a sheriff who's job it is to stop the desperadoes robbing the Red River Bank. Similar to other games of its kind the player character automatically moves through the game world and stops at specific locations where the bad guys pop up from behind cover and attack the player, who has to aim quickly and shoot them down before any damage is done. The player is equipped with a simple revolver with unlimited ammo but which has to be reloaded manually when the cylinder is empty. Occasionally weapons, such as a shotgun or a rifle, become available although these have limited quantities of ammo. Health is represented by sheriff's stars and one is lost every time the player is hit. It can be increased however by clicking on potions that appear at times. In addition to the villains there are also civilians that have to be avoided.
The game consists of four levels that can be played in any order. Locations include a town, a church, a train and a mine. Each of these ends with a boss fight against a famous outlaw from history, for example Billy the Kid or Jessie James. These differ from regular enemies in that they throw objects at the player that has to be shot down and that they can take multiple hits. In addition to the regular levels there is also a practice level where the player gets to shoot down bottles in a saloon.