Dead Head Fred is a third-person action-adventure game that incorporates a variety of gameplay styles, including combat, platforming, and puzzles. The core gameplay of Dead Head Fred revolves around Fred's missing head and his ability to "switch" heads by defeating certain enemies, decapitating them, and collecting their heads (referred to as "headhunting"). As Fred explores the city of Hope Falls, he can collect an assortment of heads, each of which has unique abilities. Examples include the Stone Idol head, which Fred can use as a battering ram, and the Corpse head, which can be used to suck up and spit out water, gasoline, and other materials. Fred uses these heads to navigate the city of Hope Falls, and certain parts of the city are not accessible until certain heads are found. The high level of radiation in Hope Falls has led to a proliferation of grossly mutated worms, which the player can collect and use to upgrade Fred's heads and temporarily increase his fighting abilities, among other benefits. Also collectible are money and special items, which can be earned by defeating enemies or completing various side-missions. There are several minigames unrelated to the plot, such as pinball and fishing, scattered around the city.
In combat, players have several attacks at their disposal, depending on the head Fred is equipped with. These attacks include combos, head-specific counterattacks, and ranged attacks. During a counterattack, the player can complete a Quick Time Event to instantly kill an enemy by removing its head, which gives Fred "Rage" points. Rage energy builds up over time, and the player can use it to unleash powerful attacks on multiple foes. Dealing a large amount of damage to an opponent will stun them, during which time Fred can remove their head. Collected heads can be traded at "Head Shops" for a usable version.
There are several types of environmental puzzles that the player has to solve in order to progress through the game. Each one requires a specific head—the Bone head gives Fred sharp claws which allow him to climb on the sides of buildings, while the Shrunken head decreases his size dramatically and lets him navigate platforming levels, such as a saw mill. There is also a mannequin head that Fred must use to socialize with the residents of Hope Falls, because they are terrified of his other heads. There are nine available heads, seven of which are suitable for combat.