The gameplay features many staples of the genre, such as navigation using a world map, random encounters, and a turn-based battle system.

First discussions surrounding Lost Odyssey began in 2003, with development beginning the following year as an internal Microsoft Game Studios Japan project.

Lost Odyssey uses a traditional turn-based battle system seen in most Japanese role-playing games, similar to early Final Fantasy iterations.

[6] Towns and cities provide inns for the player to read the thousand years of dreams, Mana/HP recovery orb for health and mana, stores for buying and selling of equipment, and save points for the game.

The combat system incorporates aspects of battle initiative and length of actions to determine how events resolve each turn.

[9] These include additional damage specific to certain types of monsters or their magic element, hit point or mana absorption, status ailments, or being able to steal items.

[18] Because of this, it has affected society greatly,[18] with devices called "Magic Engines" harnessing this power for lighting, automobiles, communication, and robots, among other uses.

While previously only a select few could wield magic, many magicians gained the ability, but such progress has also caused two nations to develop new and more powerful weapons of mass destruction:[18] the kingdom of Gohtza and the Republic of Uhra (which recently converted from a monarchy).

[19] A third nation, the Free Ocean State of Numara, remains isolated and neutral, though it is falling into disarray due to a general attempting to stage a coup d'etat.

[19] Uhra, at war with Khent, a nation of beastmen, sends its forces to the Highlands of Wohl for a decisive battle at the start of the game.

The general of Numara, Kakanas, uses the opportunity to usurp control of the country from Ming, forcing her to flee with Kaim and others as enemies of the state.

[23] Arriving in Gohtza, Kaim and Sarah arrange for a peace negotiation between the Gohtzan King, Queen Ming, and Tolten to take place on a train.

However, Kaim and Sarah are forced to go after Cooke and Mack, who steal a train to again try to find the spirit of their departed mother, leaving Jansen and Seth to participate in the negotiation alone.

They recognize that Gongora is attempting to use the Grand Staff to destroy the portal between the two worlds, killing the other immortals and making himself effectively invincible.

When the mortals become trapped in their own barrier after absorbing too much power, Seth drags Gongora through the mirror, allowing Kaim to break it and prevent him from ever returning.

Ming and Jansen get married, while Kaim and Sarah settle down to help raise Cooke and Mack, all aware that Seth is able to observe their happy endings.

The development of Lost Odyssey was first proposed to Microsoft Game Studios by Final Fantasy creator Hironobu Sakaguchi.

[28][29][34] The game's story was written by Sakaguchi, whose main aim was to create a highly emotional experience that explored the human psyche.

In addition to Sakaguchi's work, Japanese novelist Kiyoshi Shigematsu created over thirty stories detailing Kaim's life as an immortal, titled "A Thousand Years of Dreams".

The three separate teams that created battle, adventure, and cutscene components ran into "various issues" while combining their work, causing company president Ray Nakazato to consider "seamless" development for any later projects.

[28][29] The game's visual director was Roy Sato, who had a previous background in film and television and had worked with Sakaguchi on Final Fantasy: The Spirits Within.

When first approached, Rubin was skeptical, as he did not want to work in a medium that generally seemed to glorify violence, but eventually agreed to have a look at the material, and was shocked by the anti-violence message present throughout all the stories while remaining family-friendly.

[53][54][55] On November 21, 2007 a book of short stories based on the main character of Kaim was released in Japan called He Who Journeys Eternity: Lost Odyssey: A Thousand Years of Dreams (永遠を旅する者 ロストオデッセイ 千年の夢, Towa o tabisuru mono Rosuto Odessei sennen no yume).

[71] Xbox Focus gave the game a 4/5 rating, declaring its story as profound, but taking an issue with the camera control and the odd character design.

Unlike other critics, however, Xbox Focus's Alex Yusupov deemed the combat and random battles as exhilarating, and that "it's better to take a tried and true technique and make it better than introduce a completely new idea that could possibly screw up an entire game".

RPGFan stated that the story and gameplay were both "overused, uninspired, and stilted", but that the memory sequences penned by Shigematsu were "some of the richest, most emotionally charged storytelling seen in any RPG to date".

[78] GameSpot praised Lost Odyssey's "fascinating cast", character development, and "great plot", and also called the combat system "solid".

[65] GamePro magazine agreed, declaring that the main story was not particularly compelling, although it noted that many subplots carried plenty of emotional weight.

[79] On the other hand, Game Informer magazine deemed the story line as being "one of the most compelling tales ever told on the Xbox 360", and praised the "cool combat system".

[66] Despite critics' differing opinions in other areas, the game's graphics and high production values have received acclaim, although load times and framerate issues were also pointed out.