Alex lives on Planet Aries, controlled by his brother, King Igul. After hearing a rumor that his long-lost father, King Thor, is still alive on Planet Paperock, Alex travels to the planet to search for him.
The player guides Alex through eleven stages by fighting and avoiding enemies and obstacles. Alex can jump, kick, crawl or punch enemies, causing them to explode into gold coins, called Baums. New items and vehicles are gained by playing Janken (Rock, Paper, Scissors) in gambling houses, including a motorcycle, personal helicopter, pogo stick and wizard cane which allows Alex to float in the air for a few seconds. One hit from any enemy causes Alex to die instantly.
In the original Japanese version of the game, when Alex or his opponent lose a Rock Paper Scissors match, the loser's clothes disappear, leaving him/her naked with a fig leaf over his/her genitalia. In the Western versions, the loser is flattened by a heavy weight. Several levels were also renamed for the Western release.
Alex Kidd in the Enchanted Castle has been included in a variety of Mega Drive game compilations for newer platforms. The game is part of the Sega Mega Drive Collection (known in America as the Sega Genesis Collection) for the PlayStation 2 and PlayStation Portable and was also released on the Wii's Virtual Console on April 9, 2007 in North America and May 4, 2007 in Europe. The game later appeared in Sonic's Ultimate Genesis Collection for Xbox 360 and PlayStation 3.
The game is also available as a standalone unit on the Arcade Legends Sega Genesis Volume 2 Plug n' Play Joypad collection, released by Radica, and the Sega Mega Drive Handheld, a portable game console containing twenty games.