Space Engineers begins with the player selecting or joining a world with specific settings, such as the number of asteroids and the available starting equipment. When creating or editing a world, several advanced options are available to change how the player will interact with the world, and how the worlds will appear. This includes changing the speed with which several tools and machines will work, and the size of the player's inventory. While loading a world, a screen is visible for a while where one of many quotations concerning space, science, and engineering is visible in the center of the screen. There is a collection of quotes from scientists such as Isaac Newton, Galileo Galilei, Albert Einstein, as well as from Arthur C. Clarke's three laws.

Once in-game, the player is given control of a single astronaut, which is referred to as a Space Engineer. The player can build a station, large ship, or small ship. Construction begins by choosing any random block which will appear in front of the engineer and can be spawned in to create a new ship with that block used as the starting point for the rest of the structure. Blocks may be structural, functional, interactive, or aesthetic, and may fall into more than one category. Blocks also take up varying amounts of space. In addition to placing blocks, the player can also use tools and weapons. The most important blocks, the armour blocks which make up most of the structure, can be damaged and deformed through collisions or by weapon impacts.