"Spyro is the mischievous hero of this tale. He may be the smallest hero in the Dragon Family, but even the Elder Dragons admit he's got gumption! Just ask Gnasty Gnorc - he won't mess with Spyro again! Spyro's always rarin' to go, especially when he can headbash some sheep or flame some frogs. He's so full of energy, he keeps me on the move! Spyro is extremely curious and hardly ever cautious, which sometimes gets him into trouble! That's why I stick around, to make sure nothing too serious happens to him!" -Sparx
Spyro is the main character and thus the most commonly used. He has two main attacks, but retains the special abilities taught in the second game.
Sparx does quite a bit more than in previous titles. He return as Spyro's health bar (changing from gold to blue to green then fully disappearing once spyro takes a hit) and is "in charge" of all the speedway levels, asking Spyro through his kazoo voice what Spyro wants to do in these levels.
He also has 4 playable levels of his own which are bird's-eye—view scroll-shooters. In these levels, Sparx must shoot a number of enemies and collect the gems they leave, eat butterfiles which increase his health or give him special powers, collect keys to open gates and defeat the boss at the end of the levels to receive an egg.
After completing these levels, Sparx will unlock permanent special abilities for himself which can be used in normal play such as being able to collect gems further away or having an extra hit point.
As well as Spyro and Sparx, numerous other characters appear in this game.
Numerous new characters also appear as playable characters.
Moneybags returns, hired by the Sorceress to "keep charge" of certain things in the Forgotten Realms. Like in Spyro 2, Spyro must pay Moneybags to get through some levels. As said above, you must also pay Moneybags to release protesters who are blocking their own levels. At the end of the game, he appears in Midnight Mountain. You can then humorously chase him down and butt him repeatedly, getting all your gems back and getting an egg as well. If you complete the six eggs in Midnight Mountain and get Moneybags' egg as well, your atlas will show Midnight Mountain as having '6/5' eggs.
Elora returns, but is only seen in one of the cutscenes after you beat the sorceress.
Just like in Spyro 2, in each realm there are certain characters who are not playable but give you useful information in general and about the level, such as Billy Goats, French Hummingbirds and Canadian Penguins. All residents of a realm are the same species, but a different species to any other realm.