Block Hole is a combination of Tetris-style gameplay and a fixed shooter in the Space Invaders tradition. The player's focus is on falling blocks, and the action is geometrical. Rather than arranging the blocks together to make a row of disappearing blocks, a spaceship positioned at the bottom of the screen shoots blocks upwards to make the falling block pattern into squares or rectangles. Once the blocks have been arranged properly, the shape is destroyed and the player is awarded points based on the shape's size. The blocks continue to drop from the top of the screen in various incomplete shapes. As each level progresses, the blocks drop at greater speed and frequency. There are also various power-ups which could be located to increase your ship's speed, among other bonuses.

The game continues until the blocks reach the dotted line at the bottom of the screen, whereupon the player's ship is "quarthed," crushed flat.