In the "proto-open world" game, players explore the eponymous island as one of five unique minifigure characters, and can build vehicles and complete side quests; the game's main story involves Pepper Roni, a pizza delivery boy, and his efforts to stop an escaped prisoner known as the Brickster from destroying the island.

The development team studied how children engaged with Lego bricks to help shape the game's scope and gameplay.

The player is able to freely roam around the eponymous Lego Island, interact with non-player characters, build and drive vehicles, or complete several different missions.

[1][2] The game features five playable characters: police officers Laura and Nick Brick; pizzeria proprietors Mama and Papa Brickolini; and their adopted son[3]: 23  Pepper Roni, a pizza delivery boy who serves as the protagonist.

[6] The player can also construct a race car, jet ski, dune buggy, or police helicopter with the help of mechanic Bill Ding, which can be customized and used in missions or to explore the island.

[3]: 9 While there is no running story or necessary objective to Lego Island, a special mission will occur if the player has built a police helicopter and delivers a pizza to the Jail as Pepper Roni.

[5]: 16  Using the fumes from the extremely spicy pizza, the Brickster melts the lock to his cell and escapes in the helicopter, stealing the power brick from the top of the Information Center.

Once it is rebuilt, Pepper uses the helicopter to fire donuts to speed Nick and Laura up and pizzas to slow the Brickster down, allowing him to be captured.

[5]: 13 Around the same time, the Lego Group (as well as other toy manufacturers) were trying to explore or gain a foothold in the video game industry.

In 1995, the Lego Group employee Tormod Askildsen was tasked with exploring the company's potential venture into the video game market.

[12] The rest of development team eventually grew to more than 100 people, mostly artists, which allowed for the inclusion of multiple playable characters.

[7][13] The development team created a bespoke game engine for Lego Island, which was intended to be reused in potential sequels.

[9][14] Mindscape regularly communicated with Lego Media and Darwin, which led to the inclusion of further buildings and vehicles in the game, as well as the exclusion of non-Lego elements like ropes.

The company had a program for bonuses in place, so several of the affected employees believed that Mindscape laid them off solely to avoid paying royalties.

[5]: 19 [18] In a contemporary retrospective of Lego Creator: Harry Potter, another Lego-based edutainment game, Kotaku's Zack Zwiezen noted that edutainment titles in general (including Lego Island) were rarely reviewed by video game critics upon release due to the young target demographic.

[20] The Windsor Star's Paul Dame was dismayed with the restricted building options in the game, though he recommended it to "children who love Lego.

"[21] Writing for Tribune Media Services, Pam Gleichman commented that the game was widely acclaimed by boys while receiving more mixed reception among girls after they tested it out.

[5]: 22–24 [35] The project team irregularly publishes update videos and intends to release a demo entitled Port Pizza, featuring a small island with a limited scope.