The player controls Morgan Yu while exploring the space station Talos I, in orbit around Earth–Moon L2, where they were part of a scientific team researching the Typhon, a hostile alien force composed of many forms with both physical and psychic powers, such as shapeshifting into a clone of any inanimate object.

While Prey 2, a sequel to the 2006 game, had been planned by Human Head, it fell into development hell following the transfer of the intellectual property from 3D Realms to Bethesda Softworks, and was eventually canceled in 2014.

Arkane built Prey as a spiritual successor to System Shock, giving players multiple avenues to approach and tackle missions while considering the Talos I station a thematic reinterpretation of the underground dungeon from their debut game, Arx Fatalis.

[2] The player takes the role of Morgan Yu, a human aboard a space station overrun by the Typhon, a hostile alien race with various differing subspecies.

[5] According to creative director Raphaël Colantonio, the station setting of Talos I is completely continuous rather than having separate levels or missions, at times requiring the player to return to areas they previously explored.

[10] Narratively, the player takes the role of Peter, a hacker aboard a satellite orbiting the Moon, forced by his employer the Kasma Corporation to figure out what happened at the Pytheas Moonbase.

One is designed as a single-player virtual reality experience known as Transtar VR,[12] challenging the player to various escape room scenarios aboard the Talos I station.

[15] Prey takes place in an alternate timeline where in 1958 the Soviet Union encounters a species of eusocial aliens, called the Typhon, aboard their satellite Vorona 1.

[17] Because of the numerous agencies that operated and expanded Talos I over the decades, the station includes a large mix of architectural designs, ranging from retrofuturism that was popular in 1960s America, to brutalist styles that were common in the Soviet Bloc in the mid-20th century, to opulent Art Deco put in place by the wealthy TranStar executives.

Alex contacts Morgan and suggests instead building a special Nullwave device that will destroy the Typhon but leave the station intact, citing how their research is too valuable to lose.

When Peter fulfills his contract, Kasma congratulates him but claims that due to tight budgets, they cannot retrieve him from the satellite and shut off its life support.

With help from Basilisk, Peter overrides the satellite's controls and crashes it near the real Pytheas facility, where he commandeers a shuttle and returns to Earth.

[21] However, the project faced numerous issues, including the transfer of the intellectual property (IP) rights to Bethesda Softworks (under ZeniMax Media) by 2011.

[28] Bethesda's vice president of marketing Pete Hines explained that the new game has no elements from the cancelled Prey 2 outside of the player facing aliens.

[25] According to lead designer Ricardo Bare, Colantonio had suggested they look back towards what they had done with Arx Fatalis, a fantasy title produced by Arkane in 2002 which featured "this big, inter-connected dungeon that the player could roam so long as they could unlock everything".

[36] They took this "mega-dungeon" concept, but set it as a space station filled with hostile aliens, and would require the player to consider the "full ecology" of the game world to overcome obstacles.

[25][18] They did not want the player to solve singular-solution puzzles, such as simply finding a key for a locked door, but instead "think of this as a living, dynamic world, where there are tons of solutions possible", according to Bare.

[29] In a 2021 making-of documentary created by Noclip, Colantonio and Bare said that, while the project never had any other official name, the title Prey was a direct mandate from Bethesda.

[38] Prey incorporates numerous gameplay concepts from Dishonored, which was itself inspired by the Looking Glass Studios' games Thief: The Dark Project and System Shock, where players are encouraged to find creative solutions to overcome obstacles.

"[43] The developers also took inspiration from FTL: Faster Than Light, considering the complexities of the various gameplay systems and how fast that a situation can go wrong if the player did not sufficiently plan.

They dropped this approach and instead worked the procedural generation aspects into the downloadable content Mooncrash, which takes place outside the main game's campaign.

[36] Separately, one of the tools developed by Arkane was the psychoscope, which allows players to scan an alien and learn and then use its powers; when the programmers learned of this, they quickly found that having players be able to copy the Mimic's power created a depth of new gameplay options, such as taking the form of a small object to sneak into small places or taking the form of a non-flammable object to roll through fire-laden areas.

Arkane recognized that as a research station, their security forces would only likely have common weapons, such as pistols and shotguns, and would not have the equivalent of super-powerful gear like Doom's BFG.

[51] Avellone also cited Aliens as part of his inspiration, describing it as an action-suspense film which has moments of comedy, even amid heavy action sequences, and something he reused in writing for Prey.

[15] The Mooncrash expansion was further updated in September 2018 with a free patch that provided in-game customization skins that celebrated the team's favorite roguelike games, which included Spelunky, Rogue Legacy, Risk of Rain, Don't Starve, Darkest Dungeon, and Dead Cells.

[60] PCGamesN reported that the Windows version of Prey lacked the technical problems of Dishonored 2, calling it "the best performing triple-A game" they had seen in several months.

[67][68][69] Critics praised the fully realized atmosphere of Talos I, with Neil Bolt of PlayStation Universe labeling it a "luxurious sci-fi playground".

GameSpot's Tamoor Hussain found fight sequences "rewarding",[74] while IGN's Dan Stapleton considered combat Prey's "biggest weakness" partly due to periods of AI unresponsiveness.

Shortly after Arkane Austin's closure, Rock Paper Shotgun published an article stating that Prey is a “masterpiece that the industry didn't deserve”.

[106] These figures were considered disappointing due to a lack of competition from AAA new releases and the fact that the opening week sales were 60% down from Arkane's previous title, Dishonored 2.