The game takes place in a mysterious dark forest "somewhere in the territory of the Soviet Bloc",[3] wherein the main characters have been trapped.

During daytime, the player can explore the world and scavenge for supplies at several locations scattered around each biome as well as spend this time repairing doors or barricades around the hideout and crafting new items and upgrades at the workbench.

Planning a defensive strategy is key and players have the opportunity to lay traps and barricade doors or windows to slow down any intruders.

The game switches to a different map in its second chapter, with the previous regions becoming locked and several new gameplay elements and NPCs being introduced.

[4] Darkwood is set somewhere in Poland[3] in the late 1980s where a mysterious forest has engulfed a large amount of land and is continuing to expand.

Many people have been left trapped by the forest and a strange plague is ravaging the survivors, killing and causing victims to transform into monsters and abominations.

A group named "The Outsiders" consisting mostly of government officials and soldiers were sent to investigate the woods, setting up hideouts and a tunnel system to get in and out of the forest.

After the prologue, the player takes control of "The Stranger", a man who is searching for the stolen key that will lead him through an underground passageway out of the forest.

Other characters include a trader who helps the protagonist in the prologue, a half-man half-wolf hybrid known only as "The Wolfman", a drunk cyclist known as the "Bike Man" and Piotrek, who is mesmerised by space travel and Yuri Gagarin, and wishes to build a rocket.

The game begins with The Doctor rambling about the forest and how it has consumed all exits and trapped its inhabitants, his inability to treat the plague and his devotion to escaping the woods before he perishes.

It is implied in a cutscene that the Trader stumbled across the Doctor's cottage and rescued the Stranger, bringing him back to a hideout in the Dry Meadow.

Once finding the Doctor in the train wreck (either by exploring his house from the prologue, or getting an appointment from the Musician), he will attempt to resist the Stranger.

However, careful exploration reveals this ending to be an illusion which the player can uncover, if they spot the odd things in the apartment block.

The being attempts to entice the Stranger by making him feel warm and tired, if the player does not resist then they will fall unconscious and be back in the apartment with only one course of action available: bliss and ignorance.

The death of the strange being and the Stranger's sacrifice allow the military to deploy to the forest safely to save the remaining inhabitants and restore order.

On August 7, 2019, the 1.3 version was released, containing a number of bugfixes, optimizations and localizations for Simplified Chinese, Italian, Turkish and Hungarian.

[15] Amy Josuweit, writing for The Mary Sue, praised the game for not relying on jumpscares, creating what she calls a "PTSD-inclusive horror experience".

In the second one, Tom Marks (writing for IGN) praised the game for "not taking cheap shots" and "playing surprisingly well with a Switch Pro Controller".