Color Yarn Sort is a sorting game that shares similarities with hardware and parking lot sorting games. The player's task is to transfer colored yarn on wooden spools into color-matched baskets across levels. They earn gold coins for their efforts.
The player prompts the game to perform a transfer by placing a basket in an optimal position. Each level displays the yarn spools on vertical conveyor belts near the top of the screen, five empty production spaces near the center, and a mix of baskets in a tray below the spaces. On most levels, some of the baskets are pressed down into the tray. The player must use a specific number of other baskets before an unavailable one pops up.
Given the limited number of spaces, the player must select baskets carefully to match the yarn colors closest to the bottom of the conveyor belts. During the transfer process, the game tracks the amount of remaining room in a basket on a horizontal progress bar near it. It seals a full one with a plastic lid before making the container disappear from the screen.
Color Yarn Sort offers three boosters below the transfer area that unlock at specific times. With the first one, the player can auto-transfer yarn from any spool to a basket. The second one allows them to select and use an inset unavailable basket. Lastly, they can randomly shuffle some yarn spools.