Based on the 2004 freeware game Yume Nikki, Dream Diary shifts the focus from a top-down sprite-based game to a mix of third-person and side-scrolling platforming segments (the latter similar to Limbo and Inside), both rendered in full 3D. The game also introduces more traditional adventure game elements (including solving puzzles and finding items) to progress through each part of the dream world.
The game's premise is similar to the original, following a troubled social recluse (known as Madotsuki) as they explore the surreal (and sometimes horrifying) dream world while writing their progress in a dream journal. Along the way, they can find items that grant unique effects.
Similar to the original game, players can play bonus deliberately-retro mini-games. The two included are "Super NASU" (a clone of the Pang series using elements from the original game's NASU mini-game) and "Ao Oni" (a stripped-down action-arcade version of the survival-horror RPG of the same name).