Lego Racers is a racing game played from a third person perspective. Set in the fictional Legoland universe, the game depicts Rocket Racer, the "greatest racing champion" in Legoland. After becoming bored from beating everyone at racing, he decides to create a racing contest, and finds the best racers in the history of Legoland using a dimensional warp machine created by his friend, Veronica Voltage, a genius scientist and mechanic. The player takes on the hosts and co-racers in circuits of races in an attempt to reach and beat Rocket Racer and become the "Greatest Lego Racer of All Time", completing the game. Each circuit is contested by the player, the host, and four randomly chosen co-racers, and has four tracks. The hosts are, in order, Captain Redbeard, King Kahuka, Basil the Batlord, Johnny Thunder, Baron Von Barron, and Gypsy Moth. In these circuits there are a total of 12 unique tracks; the latter three circuits are the first three circuits reversed track-wise with each track now mirrored.
Players assume the role of either one of several pre-built or custom-built minifigures and compete against other minifigure characters in races set across different tracks in the Legoland universe, using a variety of cars built out of Lego. At the beginning of each race, the player can perform a "Turbo Start", which allows the player to start the race at full speed. Throughout races, the player can also perform power slides and "Super Slides", which allow the player's car to turn around corners more sharply.
Each of the game's tracks contain power up bricks, which can be collected by the player and used to gain an advantage over other racers. The power ups are divided into four categories: Projectile, Hazard, Shield and Turbo, with each providing a different use to the player. The player can also collect up to three "power plus" bricks, which increase the capability of any power ups collected. Most tracks contain one shortcut that players can use to get ahead of opponents, which are usually either found with careful looking, or accessed using power-ups, mainly Projectile power-ups that destroy part of the scenery. During a race, the in-game HUD displays the player's position, lap number, "lap timers", and a "Power Up Icon" if the player is carrying any power up or power plus bricks. The player can also choose between viewing the "Speedometer", the "Course Map" or the "Close-up Map".
The game contains three single-player modes: "Circuit Race", "Single Race" and "Time Race", as well as one multiplayer mode, "Versus Race". The Circuit Race mode follows the game's main plot, and allows players to race through circuits made up of multiple tracks, gaining points based on where they place, while contending with a highly skilled racer who leads each circuit. In a circuit, the player must earn enough points to move on to the next race, and will win if they finish with the most points (even in the event of a tie). Placing third or above in a circuit unlocks the next circuit for the player. The Single Race mode allows the player to race on a single track unlocked from the Circuit Race mode. The Time Race mode places the player in a race against Veronica Voltage driving a ghost car with the aim of beating her best time around a track chosen by the player. If the player beats Veronica's time on all tracks, they unlock her car and her character parts. Versus Race allows two players to race against each other in a split screen view without non-player character minifigures on the track.
Throughout the game, the player can unlock various brick sets and character pieces by completing certain tasks, such as coming first in a Circuit Race. The game's "Build Menu" allows the player to build custom cars, minifigures and driving licenses of their own design using unlocked bricks and character parts. Minifigures can be customized with different hat, hair, head, body and leg parts, and given a name entered by the player on the minifigure's driving license. A picture of the player's minifigure is also placed on their driving license, and their facial expression can be changed by the player. The player can create a custom car using a combination of different chassis and car sets. The player can rotate, move and place bricks from these sets directly on to the chassis. Placement of the bricks changes the car's balance and weight, which affects its overall performance. The "Mix" option creates minifigures from randomly selected parts, while the "Quick Build" option creates one of 2 presets for a specific chassis.