Legacy of Kain: Soul Reaver originated from the soured relationship between Silicon Knights (SK) and Crystal Dynamics (CD). During the development of Blood Omen: Legacy of Kain, developer SK was promised the right to first-refusal for the creation of a sequel by publisher CD, but this was violated when CD exited the publishing business allegedly without telling them and sold to Activision the publishing rights to the PC version of Blood Omen and potential sequels. A pitch was commissioned by Activision and created by CD under the working title "Kain II", but feeling their pitch was sub-par, they asked SK to create their own competing pitch. In response, CD allegedly attempted to poach SK employees and disparaged their work on Blood Omen to industry figures in an alleged effort to undermine SK's pitch. After a settled lawsuit, CD was purchased by Eidos Interactive along with the series' trademark from Activision, and Kain II and SK's pitch were both scrapped. Series creator Denis Dyack later described this conflict as CD trying to "take over" the series.

CD employees Amy Hennig and Seth Carus then created a pitch for a new IP called "Shifter", focusing on a fallen angel of death who was betrayed by gods he stood by and sets out on a mission to expose and destroy them. Executives at Eidos however were afraid to pursue a new IP, and asked that it be repackaged as a Blood Omen sequel. SK filed an injunction against CD after the game's announcement accusing them of plagiarizing their concept, but this case that ended in a highly confidential settlement. It is known that SK would need to be credited as the creators of the Blood Omen characters in CD's future games using them, but SK would never work on the series again. Dyack would later call Soul Reaver's creative direction "alien" to what SK would have done. The main plot of Shifter, including the undead protagonist with wings that allow him to glide and shift between spectral and material realms, would carry over into the final version of Soul Reaver. Designs based on early versions of Raziel from the Shifter pitch would also later be featured as downloadable content in the 2025 remaster of Legacy of Kain: Defiance.