The game is set in an open world populated with animal-like creatures called "Pals", which players can battle and capture to use for base building, traversal, and combat.

It was generally well received, with praise for its gameplay, content, and satirical premise, but criticism for its reliance on shock humor and use of unoriginal designs and mechanics.

Players must manage their hunger level, craft basic tools, gather materials, and build bases that act as fast travel points.

[10] The factions include human NPCs who occasionally spawn in the world, either patrolling or battling each other, who are hostile to the player and can fight them with weapons.

[2] It was first planned for release in 2022, but the deadline was extended to August 2023 as the scope of the project grew and the company hired more staff, and then once again to support dedicated servers on launch.

[16] The main character designer for the Pals was initially rejected during an October 2020 recruitment drive for illustrators, but was hired when she reapplied in February 2021.

[16] The game was revealed on June 5, 2021, detailing key features such as survival, crafting, exploration, exploitation of creatures, and the multiplayer focus.

[26] The game's reveal trailer was met with high engagement on social media and mixed reception, ranging from excitement to disgust.

[29] The satirical tone of promotional material, with references to labor laws and illegal hunting, sparked interest in the game exploring the dark undertones of the creature-collecting genre.

IGN and PC Invasion praised its fun combat and engaging gameplay loop, with the latter noting the large, albeit somewhat barren, environments being brought to life by different Pals.

[37] PCGamesN called the game "a morbidly compelling descent into creature capitalism", stating that though it had some flaws, such as its insistence on ethically questionable behavior and the unoriginal designs of Pals, its gameplay and the open world made up for it.

"[39] Conversely, Rock Paper Shotgun and PC Gamer criticized Palworld for relying too heavily on shock humor about animal abuse and sweatshop labor in its gameplay, which PC Gamer derided as "mid-2000s Newgrounds edgelord" and "over-committing to the bit",[40] with Rock Paper Shotgun arguing the gameplay mechanics and presentation of Pals fundamentally misunderstood the meanings and appeal behind Pokémon and the monster-catching genre.

[41] It also attracted some criticism for the unoriginal designs of Pals[42][38] and mechanics lifted from other titles, which VG247 thought undermined a game "worth admiring".

[56] In response to those reports, Pocketpair community manager Bucky wrote on Twitter "This emerging 'Palworld has lost X% of its player base' discourse is lazy, but it's probably also a good time to step in and reassure those of you capable of reading past a headline that it is fine to take breaks from games."

[60] However, the CEO of Pocketpair stated that the character concepts were mostly designed by a single graduate student hired in 2021 following the company's public recruitment run for new illustrators.