Demon Attack is set on a surface of a planet,[a] when strange winged creatures float above, threatening the player. They attack, leading the player to retaliate by shooting at them with a laser cannon.[3]
Matthew House of AllGame described the game as a fixed shooter.[5] The players start with three lives, called bunkers in the game, which are displayed at the bottom of the screen. Each time the players are hit by enemy fire, they lose a bunker, and the game ends when all bunkers are depleted.[3] The waves of enemies grow more complex as the game progresses, with wave five having enemies divide into two smaller enemies after being shot.[6] Later waves have enemies that will dive towards the laser cannon.[7]
The players can move left and right at the bottom of the screen to avoid enemies. The game offers different modes of play, including a Tracer Shot mode, which allows the player to guide lasers after they are shot. Two-player games can either be played competitively against each other or as a co-op mode.[7] In the co-op mode, the two players alternate every four seconds on who controls moving and firing the ship's laser.[3][6][7] In competitive mode, each player controls their laser cannon simultaneously with their own score and bunker count. If one player loses all their bunkers, the other player continues until their bunkers are also lost.[3]
In the Intellivision version, the boss fight with the demon flagship named Pandemonium appears after three waves of enemies are defeated.[4][8] It is destroyed by eroding its shield with laser shots and aiming for a small rotating wheel of vulnerability.