.38 Ambush Alley is a game for the Action Max. As a VHS tape, the on-screen action is not interactive, rather, scores are tallied when the console's TV-mounted sensor detects "hits" and "friendly fire".

The first three minutes of the video, as with all Action Max tapes, is a calibration routine, and instructional video. Gameplay begins at a police academy, with the player in the roll of an unnamed rookie. The officer in charge explains that the toughest test a trainee will face is at "a little place called Ambush Alley". Ambush Alley turns out to be a mock city, where trainees must shoot humanesque targets, and avoid shooting civilian targets.

The trainees eventually progress to an area consisting of mannequins, rather than paper targets, with the police officer in charge instructing the player on where to shoot, pantomiming a real-life police combat situation. The tape ends with credits, and previews of other Action Max titles.