According to producer Rick Banks, the idea for Raze's Hell came about from Artech's history of creating interactive children's products. Employees would often add "test" features to the games, such as setting the characters on fire, which were discovered by focus groups during a play test session. After positive feedback to these features made Artech realize there was an "urge to kill and maim the commercially created cute", they decided to develop Raze's Hell, with the game's story (which was made before the gameplay) establishing that the cute creatures were actually cold-blooded killers.

In contrast to the Electronic Software Ratings Board's rating of Mature in NTSC regions, the PAL version of the game carries a PEGI 12 rating (equivalent to the ESRB's Teen rating). This could be due to the violence and gore being cartoony and low impact, inflicted upon non-human characters, while being played for laughs.