KOF '97 follows the same format as the previous KOF games, but introduces two distinct playing styles which the player can select before choosing their team: Advanced and Extra.
Advanced mode is based on the previous game in the series, KOF '96, but features a revamped Power Gauge. Instead of charging the Power Gauge, the Power Gauge is now filled whenever the player strikes the opponent or by performing Special Moves. The player can stock up to three Power Gauges. The player can use one stock of the Power Gauge to perform a Super Special Move or enter a "MAX" mode, in which the player's defensive and offensive strength are increased. Performing a Super Special Move while in MAX mode will make the player perform a more powerful Super Special Move.
Extra mode is based on the first two games in the series, KOF '94 and KOF '95. Like in those games, the player fills the Power Gauge by charging it or defending against the opponent's attacks. After the gauge is filled, the player enters MAX mode and like in Advanced, their character's offense and defense will increase. The player can only perform Super Special Moves in MAX mode or when the life gauge is near empty and flashing red. When the player performs a Super move in MAX mode while the life gauge is flashing red, then the Super move will be even more powerful. The Emergency Roll maneuver from KOF '96 used in Advanced mode is replaced by the side-step from KOF '94 and KOF '95.
In Japan, Game Machine listed The King of Fighters '97 on their September 1, 1997 issue as being the second most-successful arcade game of the month. According to Famitsu, the AES version sold over 19,900 copies in its first week on the market.