Barbie in the 12 Dancing Princesses is based on the 2006 direct-to-video animated movie of the same name and the story is loosely based on the fairy tale The Twelve Dancing Princesses. Barbie is cast as Genevieve, one of the twelve princesses who live with their windowed father King Randolph in a castle. They live a frivolous live, so Randolph brings over his cousin Duchess Rowena to raise them as proper princesses. She makes their lives miserable however and poisons the king, so they flee to a magical world brought to life through a story of their mother. Rowena traps them there, along with Genevieve’s friend Derek, and they need to use a goblet to collect mystical water that can cure their father.

The player controls Genevieve in a full 3D environment, but with a small amount of freedom and sometimes with brief branching. She can be moved in any direction and can jump while twirling, to complete platform sections or to avoid water that kills instantly. The game uses many moving platforms, elevators, gaps and platforms that disappear when she stands on them too long. There is no health system and she has an unlimited amount of lives, respawning right away at the last point. Along the way she can collect gems. She sometimes meets animals she can pet. There are many sections with short mini-games activated by walking into large, spinning coins. In one of them a cat is controlled in a game of Breakout, bouncing an apple to bring down leaves from a tree or using a water bubble. In another Genevieve needs to throw berries towards birds in a nest with a moving obstacle blocking the path. Another section offers a jigsaw puzzle that needs to be completed to open a door. Between gameplay sections there are many animated cut-scenes.

After the initial section a hub is entered that leads to four different worlds where the eleven princesses can be found. They are eventually brought back to the central hub by assigning the correct gem to them. The hub levels contain more mini-games next to the main exploration. She needs to guide a water bubble to collect music notes, design a dance choreography and a water fountain show, follow dance instructions similar to the Dance Dance Revolution games, use a slingshot to get flowers on waterlilies, and create a rainbow by moving a cloud to collect colours while avoiding dark clouds. There is a falling block puzzle game where the colours of the rainbow need to be gathered by matching gems of an identical colour in a group of three, horizontally or vertically, while dark clouds appear and remove blocks. Many mini-games are often repeated multiple times for the different princesses.