Vision Scape created the prototype while it made cutscenes for Sonic Heroes (2003); it was developed on the Xbox with intent to port it to the GameCube and PlayStation 2.

The "Mission" mode was single-player and involved exploring the environment to collect a key that gave access to a room with a Chaos Emerald.

[2][4] Sonic Extreme was developed by Vision Scape Interactive, a San Diego–based studio known for its work on the shoot 'em up SeaBlade for the Xbox and the skateboarding game Tech Deck: Bare Knuckle Grind for Microsoft Windows.

[3] Vision Scape cofounder Mark McDonald decided to pitch a spinoff that used the Bare Knuckle Grind engine with the Sonic intellectual property (IP).

According to McDonald, Naka was impressed and enthusiastic, and said the project would move forward as a collaboration between Sonic Team and Vision Scape.

At Naka's request, Vision Scape produced a software design description for a full Sonic Extreme and its budget;[2] the studio management believed they had secured the deal.

McDonald believed that Sonic Team took Vision Scape's concept before going in a different direction, which he thinks explains Sega's silence.

[4] Sonic Extreme was publicly revealed in May 2011, when a YouTube user, "ProtonX3", released videos demonstrating the environments and modes.

Game Informer and VG247 thought Sonic Extreme looked "predictably" and "compellingly" awful, respectively,[9][10] and GamesRadar joked it "prov[ed] once again that slapping the word 'extreme' onto any popular franchise, activity or consumer good is a surefire way to guarantee that it will be anything but.

[3][5] After the video's release, Engadget was positive, saying "Extreme looks like it could've actually been a lot of fun" and favorably compared its battle mode to Mario Kart 8's.