SpongeBob is assisted by a D.R.I.V.E. mentor named Seymour Scales to earn his license and pass the last test of the year. Seymour's D.R.I.V.E course stands for Destruction, Recklessness, Impairment, Velocity and Escape. It all started when SpongeBob failed his driving test after the tutorial on how to play the game. Mrs. Puff told him how to drive the right way, then she told him to drive without assistance. SpongeBob got worried and ended up failing. SpongeBob is upset and is sitting outside of boating school. A bus stops near him, as Seymour steps off and introduces himself. Knowing that SpongeBob has failed his driving test, Seymour informs SpongeBob about D.R.I.V.E. Soon, SpongeBob's friends help him pass, but in the end, when SpongeBob got his license, Mrs. Puff informs him the license is not real. Seymour enters his vehicle, as does SpongeBob. SpongeBob bashes Seymour's vehicle, as random items fall out of Seymour's trunk, stopping/slowing SpongeBob down. SpongeBob ends up winning, while Mermaid Man and Barnacle Boy restrain Seymour. SpongeBob is upset and decides to go take Mrs. Puff's driving school again.
The main genre of the game is a destruction derby, with racing as a sub-genre. Players can play as their favorite SpongeBob characters and drive boats to smash opponents. The main gameplay is divided into five sub-genres each forming the acronym D.R.I.V.E. In Destruction, players must smash into their opponents and collect their fallen boat parts. In Recklessness, players must smash and perform different actions to obtain D.R.I.V.E points. In Impairment, players must stun their opponents and strategically push them into pits. In Velocity, players must race their opponents to the finish. In Escape, players must quickly take out their opponents and try to survive a number of rounds. The game even features a multiplayer mode and a replay saving system so the player can watch their favorite replays.
There is an exclusive feature on the DS version that is only for the Nintendo DSi, which the player can take a picture and then add SpongeBob-themed stickers to it. However, the player cannot save the pictures. If the player has a DS, it is completely deleted.