Dr. Eggman wants to change his ways, opening a massive new theme park floating rather curiously above the planet. Sonic, wary of his nemesis, visits the theme park and discovers the true evil story: the park exists thanks to an alien race known as the Wisps, powerful creatures whom Dr. Eggman has kidnapped. Sonic agrees to free them from the amusement park, but he won't be able to do that without the Wisps' help.

In a return to the classic platformer Sonics of old, Sonic Colors uses the full width of both Nintendo DS screens to present a 2D side-scrolling adventure of colourful proportions. Sonic has the help of the Wisps' unique abilities, such as drilling deep underground or rocketing high into the air, to aid him in his quest to retrieve the Chaos Emeralds and stop Dr. Eggman's dangerous plan. Six Wisps are at Sonic's disposal, though their effects last only a limited amount of time. Four of them, White, Blue, Yellow and Orange, are similar to Wisps seen in the mobile game's big brother Sonic Colors for the Nintendo Wii. Two other Wisps, Red (turning Sonic into a lethal fireball) and Velvet (which allows Sonic to float in midair and suck up nearby rings and items), are exclusive to the DS platform.

A multiplayer mode is included, allowing two players to compete across multiple levels to reach the end goal first, along with a time attack mode.