Coral Cave is part of a partially-submerged cave system with several underwater segments. It is similar to the past timeline Quartz Quadrant from Sonic the Hedgehog CD, with coral replacing the quartz and no signs of machinery besides the enemy robots.
The main "gimmick" of this zone is the minecart. In Act 2, there are several mine cart sections where the player is only allowed to jump. Towards the end of Act 2, the mine cart falls into a dark, three-dimensional cavern. In this section, the player can turn left and right at forks in the track and jump over spikes and lava pits.
The boss of this zone is Ghost Kraken, with the battle taking place on a circular plane. The boss attacks using its tentacles and by spitting ink at the player. It can be damaged by attacking its tentacles. At times, Ghost Kraken pulls the playing field underwater, although the player isn't affected by this. However, the tentacles used to pull the field underwater flick the player away when they try to jump over or smash through them, effectively cornering the player in one part of the ring. Before receiving the final blow, it will fire ink at the screen in attempt to obstruct the player.