People inhabiting a world called Felix communicate with gods to divine their future. The king of the Forest Country is looking for a husband for his daughter and organizes a tournament for noble young men from different countries. The prince from the Lake Country is victorious, but an evil magician turns him into a strange-looking creature and banishes him to faraway lands. The prince has to travel back and find a way to remove the curse.

Märchen Veil I is an overhead action game with light role-playing elements. The game consists of maze-like stages heavily populated by enemies. The prince has to fight his way through by using ranged magic, which effectively turns the game into a shooter. The magic attack can have different properties depending on the special items picked up by the prince. Throughout the game the player will also find items that restore or permanently increase the protagonist's health. Still-screen scenes (called "visual stages") advance the story between levels.