Shadows of the Damned originally started development as Kurayami. The story and setting were heavily inspired by Franz Kefka, and the game was originally meant to be free-roaming and have a "heavy focus on action".

There is a poster of a demon going in a red portal and coming out of a green portal (the portals being on humans). Johnson then comments "You leave town for a few demon centuries and suddenly there's ALL this amazing new technology when you get back." This is a reference to Portal.

The level "As Evil As Dead" contains several references to the movie The Evil Dead. Outside of the stage's title, there's a scene in which Paula takes a POV shot chasing Garcia much like the monster did in The Evil Dead. There's also a demon trapped in a basement also much like Cheryl was in the film.

In an interview with IGN, Suda 51 said that his next game (after No More Heroes 2) would be a action/horror title in which he said the main character would have a "very cool watch".
The game was later to be revealed to be Shadows of the Damned however, the main character, Garcia Hotspur doesn't wear a watch.