Players can create their own characters and lead them through an authentic WWE storyline, to become league heroes or despised villains, as THQ's popular professional wrestling series returns to the ring. Once again developed by Yuke's Co., 2004's SmackDown! Vs. Raw allows players to choose whether their characters will be "good guys" or "bad guys," each with advantages and limitations. Bad guys get little love from the crowd, but they can ignore the referees and take all the dirty shots they want. Good guys have to play by the rules (and play to the crowd), but when they fill their "clean fighting" meters, they become nearly invincible, and gain access to a number of powerful, unstoppable attacks.

Though designed to offer the same solid gameplay of previous releases in the series, a number of adjustments and additions have been made. The system of four grappling types returns, but has been tweaked so that "powerful" and "submission" attacks are more difficult to pull off but cause much more damage, while "quick" and "signature" attacks are much less risky but cause less damage. New pre-match mini-games mimic the smack-talk and shoving that often takes place before a real WWE match, and may award starting advantages to the players who win them. The Create-A-Pay-Per-View feature returns from the WWF Smackdown! PlayStation games, with more customization options, and players can now also create their own championship titles and belts. The fan-favorite "Bra and Panties" matches return as well, replete with the new ability to "spank a diva" when she's in submission.