The boy Rhun and the girl Melvy live in a quiet forest village, both studying the art of magic. They enjoy a peaceful life, learning the secrets of the spirits and magical creatures populating the area. But on one fateful night, everything changes. A horde of goblins invades the village, burning it down. And it looks like the local church is in cohorts with a powerful demon bent on destruction! Before the heroes can realize what is happening, they are forced to escape into the forest, with only their magical powers at their side...

Magicoal is a "pseudo-RPG", i.e. an action-adventure with some minor RPG elements (money, items, etc.), but without an experience system of any kind. It can be played in two-player cooperative mode, controlling Rhun and Melvy, or as a single-player game, choosing one of them and letting the computer AI control the other. The player(s) can switch between the two at any time.

Most of the game is dedicated to exploring top-down areas populated by enemies, and dealing with them in action-based combat, primarily relying on magical spells. While some of the spells have unlimited use, others must be "refilled" with special items found or dropped by the enemies. Rhun and Melvy learn spells unique to each character, of various elemental affinities and general usage (offensive, support, etc.). Money can be collected from enemies as well and then used in shops to buy items.