The game sees players taking on the role of Luigi who must explore a hotel run by ghosts and save Mario and the others after they are tricked into visiting it for a vacation by King Boo.

Unlike the story mode of Dark Moon, which focused on pre-defined mission structure of gameplay across several areas, Luigi's Mansion 3 is more open-ended allowing for greater exploration of the game's setting, with the only restriction being that players cannot explore floors in the hotel via the elevator until they have found the button that allows access to it; the hotel's main lobby and basement are the only floors to have a staircase between them that circumvents the need for the elevator.

New to the series include new functions to the Poltergust – an area burst attack that can help keep multiple enemies back, as well as blow away furniture to reveal treasure; a suction cup attachment, which allows the player to fire a plunger onto obstacles and then remove them by using the Poltergust on the cup's cord; and a slam attack, which allow players to repeatedly smash ghosts they are capturing to the ground, both for greater damage as well as a weapon to hit other ghosts around them.

Unlike Luigi, Gooigi can squeeze through gaps in vents and grills, and walk across spiked floors, but is weaker than his real counterpart and will instantly lose his physical form if he comes into contact with water or fire.

In this mode, players can engage in cooperative gameplay through "ScareScraper", a returning feature from Dark Moon, or competitive team matches in "ScreamPark".

The Mario Bros. have been invited to The Last Resort, a luxurious high-rise and Art Deco-styled hotel nestled in a mountainside area, and decide to visit it for a vacation, accompanied by Princess Peach, Luigi's pet ghost dog Polterpup and a trio of Toads that serve as the former's entourage.

He discovers that the hotel's ghostly owner, Hellen Gravely, lured the group there as part of a trap by King Boo, whom she had freed from Professor E. Gadd's custody after his recapture in the previous game.

With the help of Polterpup, who also avoided capture, Luigi explores the basement and comes across E. Gadd's car in The Last Resort's parking garage and finds his latest Poltergust inside it.

Setting up a portable laboratory in the garage, E. Gadd explains how he was also tricked into visiting the hotel and taken hostage by Hellen, who then plundered his latest ghost collection to staff the building.

Upon freeing her, the group is confronted by King Boo, having lost faith in Hellen and her staff earlier and prepares to imprison them and their allies in a single portrait.

After freeing his friends from the portrait, the ghosts Luigi had captured escape from their containment in E. Gadd's now-destroyed lab and attempt to attack, but they suddenly become social when the jewel from King Boo's crown vanishes, suggesting that they were all brainwashed.

E. Gadd, seeing the ghosts upset over their home's unintended destruction, elects for the group to build a new hotel, while the recaptured King Boo is returned to his custody alongside Hellen.

[4] Some features that were previously present in or planned for the Nintendo 3DS remake of the original Luigi's Mansion were expanded on for the third installment, such as same screen local co-op play and the aforementioned new abilities.

[9] A new trailer shown during the September 4, 2019 Nintendo Direct showcased some areas of the hotel setting and debuted the ScreamPark, a new party-oriented game mode for up to eight players on a single console.