The game, which is set in a fanciful version of the American Old West, revolves around four bounty hunters named Steve, Billy, Bob, and Cormano, who are out to claim rewards offered for eliminating the most wanted outlaws in the West. At the beginning of each stage, the players are shown a wanted poster for the outlaw they will face at its end.
Sunset Riders can be played by up to two or four players, depending on the version of the game. In the two-player version each player can choose which of the four bounty hunters to play as at the start of the game, while in the four-player version each character is assigned to a different control panel. Steve and Billy wield revolvers, Bob carries a rifle, and Cormano uses a shotgun. The controls consist of an eight-way joystick for moving and aiming, and two buttons for shooting and jumping. The player(s) can jump between higher/lower floors and slide to avoid enemy attacks.
The objective of the game is to defeat a gang of outlaws in eight stages, with a fight against a strong boss character at the end of each. When two or more people are playing, the one who deals the most damage to a stage boss receives the entire bonus for defeating him. Five of the stages are played on foot, two on horseback, and one on a moving train. A bonus minigame is played after the second and fifth stages, in which the player(s) can earn additional points by shooting outlaws as they pop up. After all eight stages are cleared, the game restarts with increased difficulty.
Power-ups and bonus items can be obtained by entering doorways, defeating certain sack-carrying bandits, or opening sacks placed on the ground. Two power-ups are available, a gold sheriff’s badge that grants fully automatic fire and a silver one that gives the player a second gun. Both power-ups can be equipped at once. Other weapons that can be used by the player include dynamite carried by female bandits (which must be thrown back before it explodes), hanging rocks/barrels/torches that can be dropped on enemies, and mounted Gatling guns available only in the last stage. An easter egg involves the defeat of the boss in the fifth stage; if Cormano is active at this point, he will catch the boss’s sombrero and wear it for the remainder of the game.
One life is lost whenever the player is hit by any enemy attack, trampled by bulls, caught in a fire or explosion, or struck by a rock or obstacle. Any power-ups that a player has gained are also lost. After all lives are lost, the player may continue the game by inserting more credits.