Like its predecessors, ClayFighter and ClayFighter 2: Judgment Clay, Clayfighter 63⅓ uses stop motion animation and claymation as opposed to traditional computer animation to produce a unique effect.
The arenas in ClayFighter 63⅓ are unique in that each one, with several exceptions, houses multiple rooms; during fights players can punch or kick their opponents into different rooms and the fight will then continue in that room. There are 26 different rooms to fight in.
The game itself parodies other fighting games. It uses a 3-level bar for super combos like in the Street Fighter Alpha series and uses parries like the Street Fighter III series, and many of the super attacks are noticeably variations of attacks from the Street Fighter series. It also features a combo system similar to Killer Instinct, although it makes fun of the combo names (for example, "Itty Bitty Combo", or "Triple Brown Betty Combo"). During battle players can use many different attacks which have their own strengths and weaknesses.
