Cuphead was inspired by the rubber hose style of animation used in cartoons of the 1930s, such as the work of studios Fleischer and Walt Disney Animation, seeking to emulate their subversive and surrealist qualities. The game features one or two players taking control of animated characters Cuphead and his brother Mugman to fight through several levels that culminate in boss fights as to repay their debt to the devil.
Cuphead's gameplay is based around continuous boss fights, with interspersed run and gun levels. The game also includes role-playing elements, and a branching level sequence. Cuphead has infinite lives, maintaining all equipment between deaths. The player can purchase weapons and "Charms" (special abilities) from the shop using coins collected from the run-and-gun levels. Player characters feature a parry attack that can be used on certain objects marked in pink, to various effects; the most important of them being increasing a "super meter" that enables more powerful attacks.
After completing a level, the player will be ranked with a grade based on their performance, through factors such as the time taken to defeat a boss, damage taken/avoided, and number of parried attacks. The levels are accessible through a top-down perspective overworld with its own secret areas. The game also has a two-player local cooperative mode that allows another player to play as Mugman.
On the fictional Inkwell Isles, Cuphead and his brother Mugman are two fun-loving kids who live under the watchful eye of Elder Kettle. Against the elder's warnings, the brothers enter the Devil's Casino and begin playing craps. When they go on a winning streak, the Devil himself offers to raise the stakes. If Cuphead and Mugman can win one more roll, they will receive all the money in the casino; if not, the Devil will take their souls. Cuphead loses by rolling snake eyes, and he and Mugman beg for mercy. The Devil makes a deal with them: collect the "soul contracts" that signify his ownership of the souls of his runaway debtors by midnight the next day, and he might let them keep theirs. They visit Elder Kettle, who gives them a potion that allows them to fire blasts from their fingers to aid in their quest, but also warns them the debtors may change themselves to different things in attempt to stop them.
The brothers travel around the Inkwell Isles, fighting the residents who have lost their souls to the Devil in order to obtain their contracts. On entering the second island, the Elder Kettle informs them about "doing the right thing" when they come up against the Devil again. Once they have the contracts, they return to the Devil's Casino, but its manager King Dice blocks their way. He has lost a bet with the Devil, presumably over whether Cuphead and Mugman would be able to complete their task, and forces them to fight his own henchmen before confronting them directly. After the brothers defeat King Dice, the Devil demands that they hand over the contracts in exchange for "joining his team". What happens next depends on the choice of the player. If the player decides to do so, the Devil turns Cuphead and Mugman into his demonic lackeys and the game ends. If the player declines, the Devil becomes furious at the brothers' refusal to honor their deal and fights them himself. Cuphead and Mugman triumph over him, burn the contracts, and race home. Learning that they no longer have anything to fear from the Devil, the former debtors honor the brothers for their heroic actions.