Magic of Scheherazade is a mixture of action- and turn-based combat RPG styles. Wandering through Arabia, you'll encounter enemies whom you'll fight in real time, using various weapons. You'll also be attacked by enemies with whom you'll engage in strategic, party-vs.-party combat. You can choose from three character classes: Fighter, Saint, and Magician. Each class has its own special abilities that you'll use in battles as well as during your exploration of the game world.

The fantasy setting of The Magic of Scheherazade borrows from Middle Eastern folk tales in One Thousand and One Nights. Many years prior to the opening of the game, the land of Arabia was taken over by the malevolent demon Goragora and his army of minions. A magician named Isfa, harnessing the power of the blue star Airosche, vanquished the demons and sealed them underground. Peace briefly returned until the evil wizard Sabaron freed Goragora and the demons from their captivity and imprisoned the Arabian princess Scheherazade and her family.