Midnight Club 3: Dub Edition is an open world racing video game and the first game in the series to include car modification, both visual and performance. By winning races, the player unlocks new cars and options to customize them with. These options include enhancing the performance, adding vinyls and new paint jobs, and physically modifying the car by changing parts such as wheels, bumpers, spoilers, neon, hoods, and engine components. The cars are divided into four classes: D, C, B and A, depending on their performance.
There are five types of races in the game: Ordered Race, Circuit Race, Unordered Race, Autocross Race, Track and Frenzy. In ordered races the player races through the city on a course marked by yellow-orange flares to reach a finish line. In circuit races the player races along a circuit course through the city for a set number of laps. In unordered races the player is free to go through scattered checkpoints in any order before crossing the finish line. Autocross races take place in a walled-in circuit of the street with no traffic or police, the goal being to finish the circuit faster than a set time. Track events, available in arcade mode, are similar to autocross races, except that the player competes against other races inside the barricaded track, often taking more damage. Frenzy events also available in Arcade, are time trial races where the player gets every 15 second a nitrous boost, also the handbrake won't work and the race only ends when the time is over.
Players can also create their own races in the Race Editor (not available in the PSP version). Players can create either a circuit, ordered or unordered race by placing checkpoints throughout the city, and can change racing conditions such as traffic, weather, and time of day.