In 2004, Shenmue Online was announced to be development in joint venture between Sega Japan and JC Entertainment of Korea.

[3] However, in November 2005, it was confirmed in an interview with Yu Suzuki that even though the Korean company JCE had announced their withdrawal from development, since Shenmue Online is a Sega venture, they would fulfil their duty of completing it.

[4] At the China Joy convention in July 2006, with the development under the guise of a Taiwan-based company, a trailer was shown, which showcased features, including mini games and combat with marked graphical improvements.

Since 2007, news about Shenmue Online slowly declined and reports of its cancellation appeared on Destructoid[6] and Wired.

Shenmue Online's world will be much bigger than the home versions thus far, including over 1200 buildings/locations, and it will be possible for each player to have his or her own house.