Production began in 2015 by developers from the Minecraft multiplayer server Hypixel with funding from Riot Games, who later bought the studio in 2020.

Hytale will feature block-based construction and include many different world editing and cinematic tools players can use in-game.

[13][14] They originally wanted to avoid making a voxel-based game, but eventually decided to do so as they had experience in that genre from the Hypixel server in Minecraft.

[8][21] In July 2024, Hytale's developers reported that the game was being migrated to a new engine, a process that was expected to be complete by the end of the year.

[22] Hytale was nominated in the Most Wanted Game category at the 2019 Golden Joystick Awards but lost to Cyberpunk 2077.