The game switches between normal gameplay levels representing the city and surrounding areas, and 'nightmare' levels, similar to those found in the Silent Hill series of games. The player must navigate the city solving puzzles and fighting monsters to progress. The player controls Simon Henriksson, a 19‑year‑old who wakes up in an alley shortly after being hit by a car.

Changing the renderer allowed the developers to bypass some older limits and add new engine effects such as texture bump mapping, specular reflection and 3D skyboxes. At its beginning, Cry of Fear used the standard Half-Life renderer which was later replaced by one from Paranoia, another popular Half-Life modification. The inventory system was also reduced from 12 slots to 6. This was later changed to illuminate the area in front of the player.

For example, the phone's flashlight was initially made to illuminate an area around the player. During the 4 years of development of Cry of Fear, many ideas were scrapped, while others were improved.

The mod was delayed several times due to time limitations before being released in 2012.