The game opens with remakes of all four levels from the original 1981 Donkey Kong arcade game. These are not direct remakes of the original levels; they were made easier and some of the stage designs had to be scaled back to fit the Game Boy's smaller screen. There was a back and forth argument within the development team over where to place these levels in the new game, as they did not want it to be mistaken for a remake. While they initially planned to make the original levels post-game content, they were ultimately placed at the start of the game. According to director Takao Shimizu, this placement was not intended to give players expecting a remake a surprise (akin to a "bait & switch"), but was rather meant to cater to nostalgic fans of the original Donkey Kong.

During development, the first boss fight to be planned for the end of each set of stages was a giant flying squirrel named Momogaa, or simply "The Giant Squirrel" in English (according to an issue of Nintendo Power magazine). The Giant Squirrel would fly around and drop nuts that Mario could then throw back at it, and was roughly 1.5 times the size of Donkey Kong. This size difference, on top of it being the first boss, were the reasons it was scrapped from the final game, as it made Donkey Kong seem less threatening in comparison. The Giant Squirrel would briefly see use as a villain in Kodansha Comics' Super Mario manga in 1995, in which it leads an army of Kremlings from Donkey Kong Country against the protagonists of both games in retribution for being cut from the Game Boy game.

Some of Mario's new abilities in this game predate their appearances in other mainstream Mario games, including the Backward Somersault that appeared in Super Mario 64, and the Wire Spin's similarity to the Super Whirl Jump in Super Mario Sunshine. According to a developer interview from the game's Shogakukan official strategy guide, producer Shigeru Miyamoto explained that he wanted to give Mario these new abilities so the player could enjoy all the things you can do in pursuit to the end of the level, and he did not want these moves to be difficult to execute akin to a game like Street Fighter II. According to director Takao Shimizu, they initially wanted the cutscenes between every four stages to be demo screens where Mario would sequentially unlock these abilities. Miyamoto shot down this idea, as he thought it would be unfair to deny all the moves to players who had trouble completing the game. Miyamoto also revealed that Mario's different death animations were meant to expand on the death animation from Mario Bros., where he would catch alight if he was touched by a fireball.

This was the first Game Boy title designed with enhanced features when played on the Super Game Boy. Playing this way added a set value of colors and a background that looked like the Donkey Kong arcade cabinet.