The goal of Pai Gow Poker is for the player to create two separate poker hands out of the seven cards in his hand that are dealt to him. Each player uses their seven cards to create a five-card poker hand and a two-card poker hand. The five-card hand must rank higher than the two-card hand. The two-card hand is often called the hand "in front" or "on top", and the five-card hand is called the hand "behind" or "bottom", as they are placed in that fashion when the player is finished sitting their hand.

The banker does the same, as far as setting his seven cards in two different hands, and the player's and banker's hands are then compared, with the higher poker hand winning. If the player wins both hands, the player wins their initial bet that is made before the cards are dealt. If the banker wins both hands, the player loses his bet. If the player wins one hand and the banker wins one hand, it's a push or tie.

The only possible two-card hands are one pair and high cards. Five-card hands use standard poker hand ranking with one exception: in some casinos the hand A-2-3-4-5 ranks above a king-high straight.

Jokers are used and in the five-card hand it can be used to complete a straight or flush if possible, otherwise it must be used as an ace; in the two-card hand the joker always plays as an ace.

While the player has options in composing their hands, the banker in casinos must use the "house way", which is simply a pre-set list of rules that must be followed when the banker composes their two hands. The house way is often very close to optimal strategy, so many players simply opt to have the banker arrange the player's card for them, using the house way, as it saves players from having to learn and memorize strategies themselves.