The game includes new modes such as Tales of Souls, an interactive story-driven mode comparable to Edge Master Mode from Soul Edge; Character Creation, in which players can create custom characters from 13 total occupations, with multiple weapons and fighting styles; and Chronicles of the Sword, a real-time-play mode that allows players to take their created souls through adventures of their own. The game also has the largest character roster — 24 characters playable in Tales of Souls mode and an additional 18 playable in all other modes — and largest battle stage selection in Soul series history.
The Character Creation Mode allows the player to choose from several classes, clothing and armor, and physical features. Most of the classes can use up to five disciplines, three of which are unique, and two of which are "Soul of ..." disciplines: an exact replica of a main story character's moves. The created fighter's personality can be altered, which influences their quotes and their actions during battle. However, the personality is chosen by the equipment the character wears, and not directly by the player.
The Soul Arena is a mode that allows both the eight-match Quick Play (the standard Arcade Mode of the game), which is light on story and allows a speedy confrontation with Abyss, as well as the pre-defined Missions which include variations on the standard matches. There is a World Competition mode created to simulate tournament rounds (of either eliminations or Round Robin) against the CPU.
The Tales of Souls mode is presented as a book, narrating the selected character's story in detail during various chapters. The player can input button combos when an icon appears in the top right-hand corner during cut scene movies. The cut scenes can have different outcomes depending on whether the player successfully inputs the sequence. During movies that precede a battle after the cut scene ends, not inputting the code could result in the player starting the subsequent battle with a disadvantageous effect.
Although the Mortal Kombat, Street Fighter and Dead or Alive series all supported online play, Soulcalibur III does not. The game's producer Hiroaki Yotoriyama said "At the current time, the online infrastructure is extremely different between countries, and there are people that can not enjoy network gaming. We've decided to concentrate on improving the game's offline content and its characters so that people all over the world will be able to have fun."