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The gameplay of E.T. consists of maneuvering the fictional alien character E.T. through several screens to obtain the three pieces necessary to assemble a device to "phone home". The phone pieces can be obtained by finding them scattered randomly in various wells (pits) or the player can collect nine Reese's Pieces and then "call Elliot," who will then bring him a phone piece. Additionally, the player must avoid an FBI agent and scientist in pursuit. If either enemy catches E.T., the player is carried to the Washington D.C. screen. If the FBI agent catches E.T. he also will lose all collected phone pieces (or Reese's Pieces if no phone pieces have been collected). The difficulty setting can be changed with the game select and left and right difficulty switches located on the console. This will either change the number of humans present, the speed of movement of the humans, or the conditions needed to call the spaceship.

E.T. is also given a limited supply of energy and starts the game with 9999 points. Any action, including movement, depletes the energy. E.T. can use Reese's Pieces at an "eat candy" spot and press the button to replenish energy. If E.T. reaches zero energy he will turn white and die. Three times per game, Elliot will then appear to revive E.T. by "merging" with him, letting the player continue with 1500 points. Locating and reviving a wilted flower adds an extra revival from Elliot. If E.T. dies more times than Elliot can revive him, the game ends.

Four of the six screens are riddled with wells of varying size that E.T. falls into if he gets too close, causing him to lose some energy. In order to get out, the player must levitate E.T. by pressing the controller button and tilting the joystick forward. Since phone pieces and wilted flowers are found at the bottom of wells, this often leads to the majority of the game consisting of players intentionally falling into wells in order to complete the round.

Once E.T. has all three phone pieces, the player may press the controller button at a "call ship zone." This causes a timer to appear and count down the time E.T. has to arrive at the landing zone. In most cases, E.T. cannot call his ship when a human is present (lower difficulty levels will allow it). Once the player finds the landing zone they may press the controller button again to call the ship. If no humans are present when the timer has run out, the ship will appear and pick E.T. up. This will end that round of play. The player is then given bonus points based on how many Reese's Pieces he has left and may continue playing for another round. Aside from bonus points earned, all rounds are functionally identical and do not increase in difficulty with play.