Magic Sword takes place in an unnamed world, which is being threatened by the dark lord Drokmar, who has control over an evil crystal known as the “Black Orb”, which would allow him to rule over the world. In order to prevent this from happening, the hero, known as the Brave One, must scale to the top of the 50-floor tower in which Drokmar resides, known as Dragon Keep. At the game’s end, when Drokmar is defeated, the player has the option of two endings: Destroy the Black Orb, or to take control of it, becoming the new dark lord.
Magic Sword shares many gameplay elements with Black Tiger. The game has side-scrolling fighting, with some platforming elements. The player controls only the main character. The accompanying ally, controlled by the computer, follows the player diligently and only attacks and jumps when the player does. Assistant characters consist of Amazon (archer), Big Man (wields an axe), Knight, Lizardman, Ninja, Priest, Thief and Wizard. The player is allowed to carry one item, which can assist the player or the current ally. The player has a magic meter. It fills up while the player is not attacking, but it empties completely each time the player attacks.
If the player attacks when the meter is empty or is blue, the player can only perform a melee attack when the standard attack button is used. Magical allies like the priest and the wizard will not attack in this situation. If it is red but not full, the player and any magical ally teamed up with him will perform a weak ranged magical attack alongside the melee attack. If it is full, the player and any magical ally teamed up with him will perform a strong ranged magical attack alongside the melee attack. Non-magical allies will attack when the player attacks regardless of the status of the magic meter.