The third game in the series takes Gabriel Knight, the former owner of a book store in New Orleans, and now a Schattenjäger ("shadow hunter") living in a castle in Bavaria, to Rennes-le-Chateau, a quiet town in Southern France. Gabriel and his assistant Grace Nakimura investigate the kidnapping of a baby: the son of Prince James of Albany was taken away, and the trace leads to Rennes-le-Chateau. While exploring the town and its surroundings and getting acquainted with the unusual history of the place, Gabriel and Grace realize that supernatural beings are pulling the strings behind the stage, and become involved in a mystery with a religious background dating back to the very beginnings of Christianity.

Gabriel Knight 3: Blood of the Sacred, Blood of the Damned is a 3D adventure game. Playing as Gabriel or Grace, the player navigates the characters through fully 3D environments, which can also be viewed and explored from first-person perspective using the "camera" option. The player interacts with people and objects by clicking on them and then selecting one of the available actions. There are many kinds of puzzles in the game: traditional inventory-based ones, detective investigation, as well as complex puzzles based on the player's knowledge and understanding of the game's lore.