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The Atari Jaguar and the Atari Lynx were the last two Atari systems to be developed, not by Atari but by outside contractors; Atari did not want any direct involvement in hardware production. In 1990, Martin Brennan and John Mathieson said that not only could they make a console far superior to the Sega Genesis or the Super NES but be cost efficient at the same time. Atari immediately agreed and the system was released in 1993 for $250 under a $500 million manufacturing deal with IBM.

Initially the system sold well, but because of poor games it was eventually considered a failure. The system was quite difficult to program for, as the hardware had a large number of bugs, including one in the memory controller that kept some of its processors from being able to execute code from the system RAM . The final nail in its coffin was the release of both the Sony PlayStation and Sega Saturn. In a last ditch effort, Atari tried to play down these two consoles by claiming the Jaguar was the only 64-bit system. Their effort was in vain, and production of the Jaguar stopped after the sale of Atari to JT Storage.

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