The hostile Space Monsters pursue the Spaceman by moving through mazes of platforms and ladders. The Spaceman can control this threat by digging holes in the girder platforms; when a hole is completed, a Space Monster can fall into them and be trapped. To eliminate a trapped Space Monster, the Spaceman must fill the hole up, causing the Space Monster to fall through. More points are scored the more floors Space Monsters fall through, but a "Boss" will survive a fall of one floor, and a "Don" will survive a fall of up to two floors. If a Space Monster falls on another Space Monster, both are eliminated for extra points.
Though Space Panic was not widely ported, and is quite primitive by modern standards, it was nevertheless popular enough in its time to inspire clones, which include:
- Apple Panic, published by Brøderbund Software for the Apple ][, Atari 8-Bit Computers, IBM Personal Computer (booter) and VIC-20
- Digger Barnes, published by Cable Software for the Amstrad CPC
- Digger Dan, published by Ocean Software for the ZX Spectrum
- Monster Inn, published by Tomy for the Tomy Pyuuta
- Monsters, published by Acornsoft for the BBC Micro
- Mr. Do!'s Castle, published by Universal, Arcade Game
- Panic, published by Mikro-Gen for the ZX Spectrum
- Panik!, published by Atlantis Software for the BBC Micro
- Roland Goes Digging, published by Amsoft for the Amstrad CPC
- Cruel and Unusual Death: If you take too long to beat the level, your oxygen runs out, and the spaceman collapses.
- Law of Chromatic Superiority: The red Monsters are weaker than the green Bosses, and the blue Dons are toughest of all. This is not the only Universal game to rank enemies with these colors.
- Oxygen Meter: Serves much the same function as a conventional level timer.
- Randomly Generated Levels: The ladders are placed randomly.
- Turns Red: Let a trapped Space Monster break loose, and it will get meaner.