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The arcade version of Ninja Gaiden is a "belt-scrolling" beat-'em-up. The player controls a ninja whose mission to defeat an evil cult led by Bladedamus, a descendant of Nostradamus who seeks to fulfill his end of the world prophecies. Upon starting the game, the player is greeted by the phrase "NINJA IN USA". Up to two players can play simultaneously (Player 1 controls the blue-suited ninja, while Player 2 controls an orange-suited ninja).
The controls of the game consists of an eight-way joystick and three action buttons: Grab, Attack, and Jump. The Grab button is located on top of the joystick itself. The player character has five main techniques: The "Triple Blow Combination" is the player's primary attack, performed by pressing the attack button repeatedly while the player is standing on the ground. While jumping towards an adversary, the player can do a "Flying Neck Throw"; throwing an enemy into a background object (such as trash cans, phone booths, or signs) will cause different power-ups to appear, such as health restoring pills or a sword that can be wielded for a limited time. While standing near overhead signs or bars, the player can hang unto them by pressing the Grab button and perform a "Hang Kick". While overhanging on a bar, the player can also move by performing a "Tightrope Walk". The last of the five techniques is the "Phoenix Backflip", in which the player runs towards the wall and performs a backflip.
The game features a morbid continue screen, where the player character is tied to a table thrashing his head violently while a giant circular saw is being lowered towards him and what appears to be a crowd of enemies is watching in excitement in the background. If the player does not continue within the 10 second countdown, the screen fades to red, the ninja cries out in agony, and the words "GAME OVER" appears followed by dramatic music.
The first five rounds (stages) are based on actual American cities such as Los Angeles, New York City, Las Vegas, the Grand Canyon, and a Transcontinental Railroad. The sixth and final stage set inside the main villain's hideout. The recurring bosses includes a sumo wrestler; a pair of wrestlers resembling the Road Warriors tag team; and a trio of claw-wielding acrobats. The final boss is Bladedamus, who wields two swords.