It is often claimed that newly appointed Sega of America CEO Shoichiro Irimajiri contacted DIC CEO Andy Heyward to make a new Sonic cartoon that would help generate interest in Sega's upcoming Dreamcast console.

Production on Sonic Underground began in early 1997, around the same time development began on both the Dreamcast console and Sonic Adventure, with the show bible written as early as March 1997.

During development, two episodes per week were produced, and writers felt they weren't given enough time to tie the overarching plot together, being limited to just a three-part 'Origins' saga for coherency.

DIC used 'cattle calls' to generate episode plots, periodically bringing in about twenty unaffiliated writers to learn the characters and brainstorm story ideas, from which only one or two pitches would be selected.

Songwriter Mike Piccirillo composed songs for episodes before any storyboards existed, working only from scripts that indicated what moral or lesson each song needed to convey.

The show's animation was outsourced to Taiwanese studio Hong Ying Animation, with storyboards and main title animation produced in Madrid, Spain by Milimetros, S.A., the same studio behind the Saturday morning Sonic the Hedgehog cartoon.

According to producer Robby London, Sega of Japan actively oversaw the show's approval process and forced DIC to reanimate the characters with five fingers instead of four, due to the Japanese cultural association of four fingers with the yakuza.

While it was long believed that 65 episodes were produced but only 40 aired, writer Ben Hurst clarified at the Sonic Amateur Games Expo 2008 that only 40 episodes were ever planned for production from the start.

The Oracle of Delphius, a recurring character who prophesies the reunion of the royal hedgehog family, is named after the Oracle at Delphi from Greek mythology.

An Archie Comics Sonic the Hedgehog special issue featured a story incorporating the Sonic Underground continuity as a parallel universe, though this reality was later depicted as destroyed during the 2013 Sonic & Mega Man: Worlds Collide crossover event.