Where the Water Tastes Like Wine is a single-player narrative game about traveling and telling stories, set in an America inspired by folklore and the Great Depression. Unlike other narrative games, however, WTWTLW is structured not as a single central narrative, but as a collection of short stories. While wandering, the player will meet 16 different characters, each of whom was written by a different writer. The stories share the theme of the failure of the American Dream, especially as it relates to those outside the mainstream of American society. The player, cursed to wander the land as the personification of Folk culture, takes on the task of spreading folktales and helping them grow, as well as collecting the life stories of the characters they meet.
The game has both a 3D overworld that the player wanders, having various adventures, and 2D conversation scenes between the player and the characters. In small branching choice sequences scattered around the world, the player collects stories on a variety of topics, and then trades those over the campfire with the characters encountered to learn more about their lives and their personal stories. Over time, these stories that the player scatters around will be passed from person to person and grow in the telling, becoming better (although less true). Through all this, the player must maintain their health and other resources against the difficulties of the hobo life. If the player can earn the trust and see the true inner selves of all 16 of the characters, their assigned task is over and they can rest.