The game was initially backed by Microsoft's Ed Fries as a premiere title for the original Xbox console, but several internal and external issues led to difficulties for Double Fine in meeting various milestones and responding to testing feedback.

Raz begins with basic movement abilities such as running and jumping, but as the game progresses, Razputin gains additional psychic powers such as telekinesis, levitation, invisibility, and pyrokinesis.

These powers can be awarded either by completing certain story missions, gaining psi ranks during the game, or purchasing them with hidden arrowheads scattered around the camp.

The mental worlds have wildly differing art and level design aesthetics, but generally have a specific goal that Raz must complete to help resolve a psychological issue a character may have, allowing the game's plot to progress.

The psitanium affected the local wildlife, giving them limited psychic powers, such as bears with the ability to attack with telekinetic claws, cougars with pyrokinesis, and rats with confusion gas.

The government took advantage of the psitanium deposit to set up a training camp for Psychonauts, a group of agents gifted with psychic abilities used to help defeat evil-doers.

During his time at camp, Raz meets several of the other gifted children including Lili Zanotto (voice actress Nicki Rapp), the daughter of the Grand Head of the Psychonauts, who falls in love with him at first sight (which he eventually reciprocates); and Dogen Boole (voice actress Nika Futterman), the grandson of one of the Psychonaut's founders who can communicate with animals and goes around with a tin foil hat to prevent his abilities from causing anyone's head to explode.

[11] After receiving additional training from Agent Vodello, Raz learns that Dr. Loboto is working on behalf of Coach Oleander, who intends to harvest the campers' brains to power an army of psychic death tanks.

Lili is soon abducted as well, and with both Agents Nein and Vodello missing, Raz takes it upon himself to infiltrate the abandoned Thorny Towers Home of the Disturbed insane asylum where she was taken.

However, he turns out to be an imposter, with Raz's real father, Augustus, appearing and using his own psychic abilities to fix his son's tangled mind and beat the personal demons.

Psychonauts was the debut title for Double Fine Productions, a development studio that Tim Schafer founded after leaving LucasArts following their decision to exit the point-and-click adventure game market.

[12] The backstory for Psychonauts was originally conceived during the development of Full Throttle, where Tim Schafer envisioned a sequence where the protagonist Ben goes under a peyote-induced psychedelic experience.

Initially the team tried to bring in children to provide the voices for the main cast, similar to Peanuts cartoons, but struggled with their lack of acting experience.

[17] Double Fine created a number of internal tools and processes to help with the development of the game, as outlined by executive producer Caroline Esmurdoc.

These were held bi-weekly with each meeting focusing on one specific movement or action that Raz had, reviewing how the character controlled and the visual feedback from that so that the overall combination of moves felt appropriate.

Initially this was formed from unpaid volunteers they solicited on Double Fine's web site, but following the signing of the Majesco publication deal in 2004, they were able to commit full-time staff to this team.

Though some of the routine business tasks were offloaded to other studio heads, Schafer brought Esmurdoc onto the project in 2004 to help produce the game while he could focus on the creative side.

Subsequently, levels that were generated were not to the expected standards due to conflicts in the toolsets they used and Schafer's inability to oversee the process while handling the other duties of the studio.

[22] Schafer believes that Fries was a proponent of "pushing games as art", which helped to solidify Double Fine's concept of Psychonauts as an appropriate title for the console after the team's collected experience of developing for personal computers.

[21] She also believes that their own lack of a clear vision of the ultimate product made it difficult to solidify a development and release schedule for the game as well as created confusion with the publisher.

[22] Esmurdoc said that Microsoft's management considered Double Fine to be "expensive and late", which she agreed had been true but did not reflect on the progress they had been making at this point.

[21] This was compounded when Majesco announced a PlayStation 2 port to be developed by Budcat Creations in October 2004, which further stretched the availability of Double Fine's staff resources.

[27][28] The following year, in late 2006, Double Fine released a second soundtrack, Psychonauts Original Cinematic Score, containing music from the game's cutscenes as well as a remix of the main theme and credits.

[32] When Majesco's rights expired, the game was temporarily removed from the service in August 2011, as Microsoft does not allow unpublished content on its Xbox Live Marketplace.

[60] By the end of the year, the title had shipped fewer than 100,000 copies in North America, and Majesco announced its plans to withdraw from the "big budget console game marketplace".

[69][71] During the Kickstarter campaign for Double Fine's Broken Age in February 2012, Schafer commented on the development costs of a sequel over social media, leading to a potential interest in backing by Markus Persson, at the time the owner of Mojang.

[73] In mid-2015, Schafer along with other industry leaders launched Fig, a crowd-sourced platform for video games that included the option for accredited investors to invest in the offered campaigns.

[75] The sequel was released on August 25, 2021 and sees the return of Richard Horvitz and Nikki Rapp as the voices of Raz and Lili respectively, along with Wolpaw for writing, Chan and Campbell for art, and McConnell for music.

[78] The character Raz has made appearances in other Double Fine games, including as a massive Mount Rushmore-like mountain sculpture in Brütal Legend, and on a cardboard cutout within Costume Quest 2.

[79] A cameo of Raz appears in Alice: Madness Returns which can be found at the Red Queen's castle as a propped-up skeleton that bears a striking resemblance to the protagonist itself.