FATAL FURY 3 ACA NEOGEO's gameplay and controls are reminiscent of the original game. The Oversway System, which previously had two planes, now features a third plane. Players primarily battle on the main plane but can gain an advantage by moving to the background sway line (LP+LK) or the foreground sway line (LK+HP).

After executing an attack in a sway plane or performing an Oversway Attack, a character returns to the main plane. An Anti-Oversway Attack can counter an opponent in a Sway Plane. Alternatively, players can evade attacks by executing a "Quick Sway," leaving the opponent vulnerable to a regular attack. Players can adjust the height of their character's jump, block attacks while airborne (Air Guard), and use a new combo technique called Combination Arts, which allows canceling a specific sequence (varying by character) of regular attacks from one to another.

Each character has standard Special Moves and Super Special Moves that are available when the life gauge flashes red. Additionally, each character possesses a "Hidden Ability," a more potent version of a Super Special Move that can only be used under specific conditions. The Hidden Ability activates once every 1024 times when the command for the character's Super Special Move is entered. A hidden ability can also be activated in "Super Mode" before a game using a secret code. When the player's life bar turns red, they must enter a specific command to trigger the Hidden Ability. Unlike Super Special Moves, a Hidden Ability can only be used once per round.

The player's initial opponent can be chosen from four options: Joe, Mary, Bob, and Franco. After defeating the first four opponents, the fifth and final opponent is Ryuji Yamazaki in a one-round plot-based match. The player then battles Mai, Andy, Hon-Fu, Sokaku, Terry, and Geese before facing Yamazaki in another full match. Depending on their overall performance, the player will face either Yamazaki or the Jin twins, Chon Shu first and then Chon Rei.