The "Orphaned kitten" was based on game's interior designer Manabu Takimoto's cat "Sasuke". During development, a game designer came by to Manabu's desk and ask to borrow the picture of "Sasuke" when he was a kitten.

Game's producer Yu Suzuki stated, "Ah, I remember that. We called him Sasuke during the planning phase too. We knew it had been modeled after Takimoto’s cat, so we wanted to leave the name as Sasuke, as a remnant of that. (laughs) But eventually someone was like, “Who named this cat Sasuke?!” and we had to change it. (laughs)". In the final version of the game, the "Orphaned kitten's" gender is now female, instead.

In the game's cutscene, "Ryo Hazuki" and "Megumi Mishima" talk about naming the "Orphaned kitten". There's an option to select Manabu's cat's name "Sasuke", if players choose "Sasuke", Ryo will say "So she can grow up to be big and strong like a ninja", but Megumi will not like it, because it's a boy's name. This name cannot be used, as it will result her name to be defaulted as Mimi.
Contributed by ProtoSnake
The Nightfall theme in Shenmue is an arrangement of the song "Outride a Crisis" from one of Yu Suzuki's previous games, Super Hang-On.
Contributed by MyAliasIsIan
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There is a hidden image inside Xiuying's eyes that acts as the reflection, presumably representing a generic "player" that she is looking at.
The texture for her face is also mirrored on the back of her head, hidden under her hair.
Contributed by ABOhiccups
During the early stages of development, Shenmue featured a bicycle that could have been used to quickly transverse town.
Contributed by CosmykTheDolfyn
In Ryo's house, under the TV in the main room is a cupboard containing a Sega Saturn. The game is set in 1986, which is about 8 years before the release of the Sega Saturn. This is a reference to the fact that Shenmue was originally designed to be on the Saturn.
Contributed by retrolinkx
Shenmue began development on the SEGA Saturn, and was later reworked for the SEGA Dreamcast. The lengthy development process is one reason the game cost $47 million to make. It was previously thought to cost $70 million, but that was said to be an exaggeration. At the time of its release, it was the most expensive development process in history. The current record belongs to Grand Theft Auto 4, costing around $100 million to develop.
Contributed by retrolinkx