Nick Kang is a young Chinese-American detective who has been suspended from the Los Angeles Police Department due to his extreme methods of policing and his ability to cause massive amounts of damage to property. However, Wanda Parks, the Chief of the E.O.D (Elite Operations Division), requires Nick's assistance in a case that involves attacks on various venues in the Chinatown district. At first Nick is reluctant to help, preferring the vigilante life and focusing on avenging his father's death. However, he eventually agrees to conduct the investigation, on one condition: he must do it his way.

True Crime: Streets of LA is a free-roaming driving and action game similar in concept to Grand Theft Auto III. The game's structure is mission-based; most of the missions are dictated by the story and initiate following a cutscene that advances it. Failing a mission still allows the player to continue playing through the chapter and undertake subsequent missions; in some cases this will lead to branching paths and optional missions. However, in order to complete the whole chapter the player must eventually succeed in all the main missions.

Nick can hijack any car on the street (usually with little to no repercussions) and freely drive through the 240 square miles of Los Angeles. Nick is capable of firing his weapon when driving; in an open top vehicle, it is possible to aim anywhere. The player can also opt for exploring the city on foot. Nick will be frequently contacted by other police officers and informed about various street crimes. He can then fight perpetrators, arrest them, knock them unconscious, or kill them to deal with these crimes.

The gameplay during the missions is separated into third-person shooting, fighting, and (more rarely) stealth sequences. All of these usually take place in relatively small, restricted environments. The shooting sequences involve Nick dealing with waves of enemies that appear in different places. Nick must react quickly, moving, crouching, or diving (with a "bullet time" effect) to avoid enemy attacks. A limited amount of painkillers can be found in such stages.

During the fighting sequences, Nick utilizes his martial arts techniques to defeat enemies in hand-to-hand combat. Nick can punch, kick, grapple and throw enemies. The player can execute combos by pressing various combinations of buttons consecutively. It is also possible to pick up primitive melee weapons lying around, or take them from enemies. Both shooting and fighting stages have destructible environments.

Stealth missions typically involve Nick traversing a hostile area without attracting the enemies' attention; the mission is failed if an enemy hasn't been dealt with silently, or shortly after he has discovered Nick. The player has the option of killing enemies or knocking them down; the latter awards the protagonist "good cop" points. Conversely, "bad cop" points are given to Nick for killing innocents or surrendered criminals. Depending on Nick's rating in these categories, the storyline branches during later chapters, leading to different endings.