Viva Piñata originally began as a game called "My Garden", and later "Amazing Garden", for Microsoft's Pocket PC PDA mobile phone. Players could attract animals to their garden and trade them with other players. Development was later moved to the Xbox with the prototype running within Grabbed by the Ghoulies and later onto the Xbox 360. The decision to use Piñata animals was made when the game's concept artist, Ryan Stevenson, looked at the original animal designs which reminded him of Piñata which he'd seen in a Mexican restaurant in New York.

A dung beetle Piñata animal was planned to be included, but was ultimately left out. It would leave droppings on the ground which could be used on plants for super growth.

The game contains several references to one of Rare's other franchises, Banjo-Kazooie. One is a Banjo statue holding a Jiggy in the back of Costa-Lot's store. This is only a visual reference, as there is no way to obtain the item. Other statues include Mumbo Jumbo and Captain Blackeye. More references can be found in the accessories shop: these include Bottles' goggles, Grunty's hat, Jamjar's helmet, Jiggy earrings, and a backpack called the Breagull Carrier. Lastly, in the background of the garden, there is a mountain with Banjo and Kazooie's faces engraved into it.

Mumbo Jumbo, a recurring character within the Banjo-Kazooie series, was originally planned to appear as an NPC in Viva Piñata as evidenced by concept art and a 3D model shown off by the character's creator Ed Bryan.