Sonic Boom: Rise of Lyric began development by Big Red Button in 2011 as Project Apollo, an ambitious action-adventure game inspired by Jak and Daxter. It went under the tentative titles of "Sonic Origins" and "Sonic Synergy", before Sega chose "Sonic Boom" in an effort to give the series a more global appeal.

The game was designed around exploration, four-player co-op, and a story about the origins of Sonic and Dr. Eggman's rivalry. Over time, Sega repeatedly changed the project's direction, including its story, character writing and designs, and adherence to established Sonic lore so that the game could tie in with the upcoming "Sonic Boom" TV series, with changes being made months before release. The game was part of Sega's deal with Nintendo for Wii U-exclusive Sonic the Hedgehog titles, despite originally being developed for more powerful hardware using Crytek's CryEngine 3. The platform change created technical problems, not helped by Sega refusing to delay the game's release, forcing the team to work with Crytek to optimize it for the Wii U. As a result, Big Red Button had to cut or simplify major features, reduce the co-op to two players, downgrade the graphics, and revamp their levels to be more linear. Upwards of 50 employees left or were dismissed by the time the game was complete.

Sega did not send advance copies of the game to reviewers before launch, but the game's numerous glitches, simplistic gameplay, poor visuals and story quickly became apparent. Its commercial and critical failure crippled Big Red Button and contributed to broader criticism of Sega's management; former Sega employee Steven Frost in particular blamed the game's poor reception on Sega's "over-ambition":

Rejected artwork exists for both Sonic and Eggman, showing potential redesign ideas that went unused.

There is an early version of a cutscene still present on the disk, showing Sonic using a crystal shard.

Within the game's data are two unused voice clips of Amy saying "You go girl!" and "Way to go Perci". This may suggest that Perci was intended to be playable at one point during development.

At release a glitch could be exploited to give Knuckles infinite jumps in midair, allowing the game to be finished in less than an hour. This glitch was fixed in the January 2015 update.

According to an interview with Bob Rafei, CEO of Big Red Button Entertainment, the idea for the Enerbeam Tether came from Knuckles' Chaotix.