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Virtua Fighter 3 is the third main entry in Sega's fighting series. The debut title of the Model 3 arcade hardware, the game features more detailed character models than its predecessor, along with effects such as motion blur and simple cloth simulation.

The character roster of the previous game returns along with two new additions: aiki-jujutsu fighter Aoi Umenokoji and sumo wrestler Taka-Arashi. The fighting system of three buttons (Guard, Kick, Punch) is extended through use of a Dodge button which, by allowing a character to sidestep to their left or right, allows the fighters to make full use of the 3D space of the arenas. Unlike in earlier games, the stages are no longer flat but feature slopes and moving elements. Some stages feature walls that make "ring out" victories impossible.