After the development for Sonic Colors ended, a few members of Sonic Team began experimenting with a new Sonic game. During this time, Sonic Team also planned to build a game which fully utilized the 3DS' various features. Eventually, between the release of Sonic Generations and the announcement of the Wii U, development for a PC version of Sonic Lost World had fully begun. Sega eventually decided it would be best to develop the game for a Nintendo platform, considering Sonic's success on Nintendo consoles, and started to develop a Wii U version of the game, taking advantage of the Wii U's dual-screen capability and Gamepad. Once the basic stage structure and storyline was confirmed, development also began on a 3DS version of the game.

The invincibility theme in the 3DS version is actually an instrumental version of the Sonic Heroes theme song.

Although fans noted that Sonic Lost World had several similarities to the cancelled Sonic X-treme, such as the inclusion of tube-shaped levels, producer Takashi Iizuka stated prior to Lost World's release that X-treme "had no impact on the title."