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In a magical land, creatures known as Pengel are living fairy paintbrushes, who can draw and bring to life other creatures, called Doodles. One day, the protagonist of the game finds such a Pengel and tries to create a Doodle. The first experiments do not go very well, and the protagonist realizes he requires the help of a young girl named Zoe and her brother Taro. Their father, Galileo, was one of the finest Doodlers (painters who use Pengels) in the land. But he had to flee as he refused to work for the corrupt king, who uses the art of Doodlers for his evil purposes. Zoe, Taro, and the hero must participate in a battle tournament and find a way to bring Galileo back and defeat the king.

Magic Pengel: The Quest for Color is a combination of "monster-breeding", collecting role-playing game in a Pokémon style, and a drawing game similar to Mario Paint. The player draws Doodles with the Pengel; the newborn creatures then join the party, where they can train and participate in turn-based battles against Doodles created by the hero's opponents.