NARC is a 3rd-person shooter that has the player tracking the distribution of the deadly new narcotic "Liquid Soul" across two different cities in Asia and the U.S.A. The player controls one of two characters - Narcotics detective Jack Forezenski (voiced by Michael Madsen), or D.E.A. agent Marcus Hill (voiced by Bill Belamy). Both are led by Narcotics chief Joe Kowalski (voiced by Ron Pearlman), and the player switches between the two as the story unfolds.

As an undercover cop, players are free to roam the streets and dispense justice at their discretion. Aside from storyline missions, players can encounter 12 types of randomized street crimes and stop them to boost their "badge rating" (loosely, a measure of their trust within the police). Players can likewise flash their badge around to cause perps to surrender or run. Criminals that resist must be beaten in a small "struggle" minigame to get cuffed. Players can also arrest alleyway drug dealers and deposit their drugs safely at the station.

Alternatively, the player can beat up drug dealers for their cash and stash, then sell the drugs to civilians for income. The player can also use the drugs themselves for temporary beneficial effects (ecstasy keeps enemies from attacking, speed makes you run and shoot faster, etc.) at the cost of badge points and the potential to become addicted. Excessive use of force against innocent civilians, or selling drugs to other undercover cops, result in major losses of badge points.

Players have a maximum badge rating of 100. If it drops below 49, they are demoted to Patrolman and cannot take new story missions. The player must roam the streets in their police blues and stop enough random crimes to be moved back to Narcotics. If the player's rating drops below 24, they are kicked off the force and rendered jobless. Jobless players cannot fight or shoot weapons without attracting police attention. Further drops in rating cause the player to be wanted by the police, with a rating of 5 or lower spawning officers specifically to shoot or arrest the player.

There are 25 hidden drug stashes in each city. Finding all of them will unlock the original N.A.R.C. arcade game for play.