It spawned a merchandising campaign in Japan, a spinoff in 1999, an anime series in 2001, and a direct sequel for PlayStation 2 in 2002. A PlayStation Portable port of the original game was released in Japan in December 2006 in North America and Europe in July 2007.

Considered ahead of its time in its day, PaRappa the Rapper is somewhat similar to the classic 1980s game Simon, in which the player is required to repeat a sequence of sounds and buttons. PaRappa the Rapper demands that the player not only get the sequence correct but also the timing of the sequence, in a call and response format. The game provides small portions of spoken vocals that are triggered when the appropriate buttons are pressed. Pressing the buttons in the correct order, with the correct timing, provides an intelligible imitation of the words spoken by the character; pressing the buttons in an incorrect order or with incorrect timing rewards the player with unintelligible gibberish.

Points are awarded for correctness and "style". By simply following the given sequence, the best a player can attain is the "U rappin' GOOD" rating. To get a higher rating, the player must "freestyle"; that is, to deviate from the given sequence but still keep in time with the song's rhythm. Through this method, the player can attain a "U rappin' COOL" rating. A player needs to have completed a level first before a COOL level can be obtained (this is not the case in its sequels). Alternately, if the player continues to play poorly, they may lose points and attain "U rappin' BAD" and "U rappin' AWFUL" ratings. A player drops down a rank after playing two wrong lines in succession, or on occasion an utterly ridiculous line, and can only go back up a level by getting two consecutive good lines.

If the stage is completed with a BAD or AWFUL rating, or if at any point the "U rappin'" meter falls below AWFUL, the stage is failed and the player can attempt the stage again, or quit. If the stage is completed with a GOOD or COOL rating, the player continues to the next stage. If all stages are completed at COOL rating, the player receives an alternate game ending, and can access a bonus song.

Rank-changing aspects of a level are only apparent during the first of every two lines. If the player successfully times the first line of a pair, but fails on the second, the rank meter will not blink BAD or AWFUL. Likewise, once the game has been cleared, a GOOD play is only necessary on the first of every two lines to get a shot at COOL mode on the second line. This is fixed in the game's sequels, but not in the PSP remake.

When the game was featured as a challenge on GamesMaster in 1998, the contestants, a team of two people, were given an extra large controller to make the game harder. The size of the buttons were that of the palm of a hand.

The player takes on the role of Parappa, a paper-thin rapping dog. Parappa is Japanese for "Paper Thin". He is trying to win the heart of a flower-like girl named Sunny Funny. He is aided by his friends Katy Kat (an enthusiastic cat) and PJ Berri (a fat teddy bear DJ with a huge appetite). Also vying for Sunny Funny's attention is Parappa's arch rival Joe Chin, a rich, narcissistic dog.

To impress Sunny Funny, Parappa learns to fight at a kung-fu dojo, and takes a driver's education course to get his license. However when he crashes his Dad's car, he has to earn money at a flea market to pay for it. When Sunny's birthday comes up, Parappa has to get cake, but ends up ruining it after an encounter with Joe. He makes a new one by watching a cooking show, and proceeds to eat a lot of it on the day. When spending some time alone with Sunny, he is suddenly overcome with the need to go to the bathroom. Parappa has to rap against his previous senseis in order to get to the front of the line to the toilet.

Then one night, Parappa is invited to Club Fun, and asks Sunny to go with him, which she agrees. Parappa then raps on stage with everybody, rapping solo at the end of the song and expressing his feelings for Sunny.

The unique visual style is that of Rodney Greenblat, an American graphic artist who is popular in Japan. Like in the Paper Mario series by Nintendo, all of the characters appear to be flat, two dimensional beings cut from paper while the surroundings are primarily three dimensional. While the setting is a bright interpretation of an urban city, the characters range from anthropomorphic animals such as frogs, spiders, and dogs, to lively versions of normally inanimate objects including onions, hammers, and flowers.