A crow is chasing a worm named Jim, while in outer space Psy-Crow is chasing a renegade ship. The ship's captain has stolen an ultra-high-tech-indestructible-super-space-cyber-suit and Queen Slug-for-a-Butt has ordered Psy-Crow to get it, since it can make her more beautiful than Princess-What's-Her-Name. Psy-Crow blasts the captain and the suit falls to Planet Earth.

Back on Earth, Jim wonders if he is finally safe when an ultra-high-tech-indestructible-super-space-cyber-suit lands on him. Luckily Jim rests in the neck ring of the suit. The space particles then begin interacting with Jim, causing a light-speed evolution. Jim soon realizes he is in control of the suit.

Jim overhears the Queen's plans for the suit and decides to meet this Princess...

Earthworm Jim is a 2D side-scrolling platformer with action elements where the player takes control of Jim, a worm wearing a spacesuit. Jim can shoot enemies with his gun or use his body (the spacesuit's "head") in a variety of ways to overcome obstacles, such as whipping it at enemies, grappling hooks to swing from them, or making it spin very fast like a rotor to hover for a short time.

While most of the game is made of standard platforming levels with a boss waiting at the end, some of the levels introduce different conditions than just reaching the end to complete them, like escorting a computer-controlled character and making sure they don't get hurt. Platforming levels are interspersed with some variations in gameplay as well, such as several space racing sequences or a bungie-jumping competition.