According to Ninja Theory co-founder Tameem Antoniades, Heavenly Sword was planned to be a trilogy, with the story for a sequel having already been written, stating:


However, it would later be revealed that Ninja Theory had decided to instead work on a new project unrelated to Heavenly Sword (possibly Enslaved: Odyssey to the West, though this is unconfirmed), and since Sony owned the rights to the IP, the possibility arose of it being outsourced to another studio. This would turn out to be the case when in June 2008, it was revealed that a sequel had been in development at SCE Studio Cambridge, but was cancelled due to Sony no longer seeing it as commercially viable. Concept art for the game was leaked in 2012, revealing details such as samurai enemies, a desert race that travelled by caravan, and the return of Nariko as the protagonist despite Spoiler:being killed by the Heavenly Sword's power at the end of the game.

Originally the game was going to be a mature-styled sequel to Kung Fu Chaos titled Kung Fu Story for the Xbox. However, development shifted over time into a new IP for the PlayStation 3.

When you play as Kai in chapter 3 to retrieve the Heavenly Sword for Nariko, you'll find Kratos's God Armor and Blades of Athena next to the Heavenly Sword from God of War.