The main character Psychonauts becomes a young boy Razputin, secretly sneaking into the Whispering Stone camp. Here children are taught psionic abilities in order to become government agents in the future. However, soon after Raz's arrival, mysterious events begin to happen around him. Children's brains are being stolen in the literal sense of the word. In addition, psionic bears live everywhere, panthers with pyrokinesis, intelligent fish in the lake, and not far away there is a half-abandoned mental hospital. And the exams on the mastery of psi-powers will not pass themselves.

Psychonauts is a classic action adventure game with quest elements. First, the protagonist finds himself in a hub location, the same Whispering Stone camp. Here he can communicate with children and adult trainers, collect collectibles and currency, and purchase ability upgrades and items. However, the main gameplay takes place in the heads of the local inhabitants. Razputin first learns how to penetrate people's consciousness, which is arranged as 10 separate levels that are required to be completed.

Each of the “subconscious” locations has its own type of gameplay. Somewhere you need to jump more, in other places you need to fight or solve puzzles. Sometimes the game becomes a race, a theater, or even a board game. Often these levels are filled with bosses. There are also collectibles scattered around them and enemies roaming around. Raz is helped to move and fight by his abilities, from telekinesis and levitation to a mental shield. Some of them are revealed as the story progresses, while others can be purchased and upgraded yourself.