A young man lives together with his mother in Kichijoji, a district in modern Tokyo. One day, he has a strange dream: he is being sucked into another dimension, a strange maze-like structure. A spirit appears in front of him and asks him his name. As he proceeds further, he meets a man who is hanging on a cross, another one who is being tormented by a demon, and a mysterious young woman who is bathing in a pool.

"Wake up!" - the voice of his mother cuts through the dream. The young man wakes up and checks his computer. Suddenly, a message arrives: the world is headed towards destruction. Only he who can summon demons through a virtual space will be able to prevent a disaster. Unable to understand what that means, the young man goes outside and finds out a murder has occurred in the nearby park. The district must be cut off from the rest of the city until the murderer is found. As the young man acquires a device that allows him to communicate with demons, he begins to realize that his role in the upcoming events may be greater than he thought.

A follow-up to the first two Megami Tensei games, Shin Megami Tensei is a first-person RPG set in modern-day and post-apocalyptic Tokyo. The hero of the game can summon demons, who consume a mysterious energy called Magnetite, which can be obtained from battles. The summoned demon joins the party and is then fully controllable by the player. The active party can include up to six characters: the hero, the heroine, and four slots usually reserved for the demons, though other human characters might also join. There is a wide variety of demons in the game, most of which are taken from real-world mythologies. The demons have levels, individual statistics, spells, special abilities, etc.

Enemy encounters are random, and the first-person combat is turn-based. During combat, human characters can use swords or guns; the heroine is also able to learn and cast magic spells. Unlike most other Japanese RPGs, the game allows the player to raise the parameters of the two main characters manually when leveling up. A major gameplay element are demon conversations, which is usually the only way to recruit demons. Typically, the player has to convince the demon to join the party by choosing appropriate dialogue lines.

All the creatures in the world of Shin Megami Tensei belong to one of the three ideologies: Law, Chaos, or Neutral. The narrative is largely dedicated to conflicts between these ideologies; during several key moments in the story, the player has to decide which one to follow. Joining one of the ideologies influences the subsequent narrative as well as some gameplay elements: certain weapons can be only equipped by a follower of a specific ideology, demons are more likely to join the hero if he shares their ideology, etc.