It was released in North America only one week before Square Enix's Final Fantasy X, and was not helped by Midway's nominal marketing campaign, Shadow Hearts initially struggled to gain the attention of gamers. The use of 2D pre-rendered backgrounds rather than a full 3D environment drew criticism as well. The game was praised for its original battle system.[citation needed] Shadow Hearts gained a cult following for its quirky use and misuse of historical facts and situations in a form of secret history.[citation needed]

With a linear storyline, random encounters, turn-based battles, and traditional elements such as hit points and magic points, Shadow Hearts plays similarly to other console RPGs. The Judgment Ring, designed to incorporate an element of chance in various outcomes based on the player's skill, is unique to the genre. There are also side-quests and an option for an additional playthrough (or New Game Plus) with the previous game's data saved to allow for completion of the monster library, to attain further collectible items or equipment, and for a statistical side-by-side comparison of the first playthrough.

The player maneuvers a 3D character in the submap, a 2D pre-rendered background representing the environment. Many items are found in the submap, typically in the form of chests, while others are marked with a shining dot. There are also items noticeable only when the player is directly in front of them. To change locations in Shadow Hearts, the player can choose from a World Map. The world map is a stylized map of Europe and China with locations indicated by dots.

Shadow Hearts uses a turn-based battle system where the player chooses actions from a menu. The list of actions include many basic commands such as Attack, Items, and Escape. Enemies are encountered randomly and are not visible in the submap. Battle commences in a 3D environment modeled after a section of the current location. The characters and enemies stay in their respective positions and only move from their position when executing an attack. The characters are controlled by the player and the enemies are controlled by the CPU.

The party is made up of three characters and can be changed, with the exception of Yuri, by speaking with the NPC Meiyuan. Characters can be positioned either in the back row or front row. The back row is suited for characters with lower physical defense and attack while the front row is suited for characters with higher physical defense and attack. Another aspect of the battle is the character's base statistics. There are the traditional Hit Points (HP) and Magic Points (MP) plus the new Sanity Points (SP). Like many other RPGs, the character's HP will decrease every time they receive damage and their MP decreases when a skill is used. SP decreases every turn and dictate how long a character can last in a battle before they become 'mentally unstable'. When SP decreases to zero, the character automatically goes into a state of Berserk and the player will lose control of that character. At the end of every battle all the character’s SP is replenished. Each character gains HP, MP, and SP every time they gain a level and there are many items which help restore lost HP, MP, and SP. There are also items which alleviate status ailments as well as revival items.

The Judgment Ring is a unique element in Shadow Hearts and is used in many aspects of the game including battles, minigames, and even shopping. The success of the characters actions is dependent on the outcome of the Judgment Ring. Essentially, the Judgment Ring is a circle with different colored segments and a rotating needle which is stopped by the player's input. When an action is chosen, the Judgment Ring is presented on the screen. Players then have to watch the rotating needle carefully as it rotates and hit the colored segments.

Every character in Shadow Hearts has their own unique special abilities. These abilities include offensive, restorative and supportive spells. Every character, except for Yuri, will gain their abilities as they gain experience and level up. Yuri, on the other hand, must acquire his Fusions by collecting Soul Energy.

Malice in Shadow Hearts is the vengeance of the enemies that the party has killed. Malice accumulates every time the player finishes a battle. Most enemies give one point of malice while bosses give higher amounts. Yuri possesses an accessory called a Talisman that can display how much malice has accumulated. It changes color from Dark Blue (lowest) to Red (maximum). Once it has reached the maximum, the door to the dark side opens and the Grim Reaper is summoned to the real world. The Grim Reaper manifests itself as the one Yuri fears the most. Once this occurs, the party will randomly encounter the Grim Reaper forcing Yuri to fight him alone.

To clear the malice the player must go into the Graveyard in Yuri’s mental realm. Once inside, there are four masks (Sword, Grail, Staff, and Gold) that will allow the player to fight a monster to clear the malice. This monster is a manifestation of the accumulated malice. Depending on the amount of malice, the monster will be different.

Shopping in Shadow Hearts is similar to most RPGs. The player can buy items or equipment using the in-game currency, Cash. The element that sets shopping in Shadow Hearts apart from other games is the use of the Judgment Ring. Throughout the course of the game, the player can collect certain Guild Cards to attain different ranks. Once the player has a card, they are automatically given an option to get a discount when buying or a price rise when selling. By collecting different guild cards, the player can receive different privileges.