According to Toshihiro Kondo during an interview in Issue #459 of Dengeki PlayStation Magazine, Ys vs. Trails in the Sky was made because Nihon Falcom wished to make use of the PlayStation Portable's wireless ad hoc local multiplayer function, which they had been unable to work into their JRPG titles. They also felt that while both Trails and Ys were JRPGs, both series had many themes related to battle and conflict, lending them a natural transition into a fighting game.

Ys vs. Trails in the Sky: Alternative Saga has an anti-piracy feature activated if the game detects the PlayStation Portable's system firmware is illegitimate. During a match, the collisions for walls and some floors will be turned off at random points, occasionally causing players to clip through walls or fall out of bounds before respawning back at the starting location. Additionally, some bosses and enemies will not respawn if they fall off the map, making fights with them unwinnable.