During Palworld's development, PocketPair hired over forty additional employees on a budget of one billion yen. Some of the staff hired notably came about under varied circumstances. For example, the character animator (despite having no prior industry experience) was hired by Takuro Mizobe after seeing his works on YouTube, where he posted combat animation videos and fan content based on the game Girls' Frontline as a hobbyist animator. Likewise, the director applied for the role during a Twitter recruitment run despite already lining up for a position at NetEase at the time. Finally, the main character designer for the game's Pals was initially rejected during a separate recruitment drive dedicated to finding illustrators that occurred in October 2020, but was ultimately hired after reapplying in February 2021.

In the v.0.1.5.1 patch released at the end of February 2024, there were alterations made that were not listed in the patch notes, primarily involving censoring profanities and slurs. These changes apply even in single-player mode, where while players can still name things whatever they want, offensive words and names are replaced with asterisks. These changes were most likely made due to Palworld developer PocketPair's partnership with Microsoft, who agreed earlier that month to help develop the Xbox releases of the game and possibly the Steam version as well. Unlike Steam however, Xbox has very strict guidelines on what can and can't be said like other console platforms, suggesting that PocketPair was catering to Microsoft with this censorship, although neither company officially commented on these changes. While some players understand the need for such measures, others criticized the restrictions and advocated for optional toggles to allow individual customization.

Following the Steam Early Access release of Palworld on January 18, 2024, the developers faced accusations of copying Pokémon models for the designs of the game's Pals. The allegations were made by a Twitter user named byofrog, who claimed that some of Palworld's creature models were directly copied and edited from 3D models ripped from Pokémon games. These allegations were criticized for scaling the Pokémon and Palworld models to be comparable in size, leading to claims that edited models were not reliable or accurate evidence. byofrog claimed in response that because the models from each game loaded into modeling software at different sizes, scaling them appropriately were the only necessary edits made to compare them, and that the models' meshes, proportions, and other fundamental features were not edited. Takuro Mizobe, the CEO of Palworld developer PocketPair, denied the allegations, calling them "slanderous", and also stated that PocketPair has "no intention of infringing upon the intellectual property of other companies".

On January 25, The Pokémon Company released an official statement confirming they were aware of a flood of inquiries about "another company’s game released in January 2024". On September 18, Nintendo and The Pokémon Company filed a lawsuit against PocketPair, but instead of accusing them of copyright infringement as critics were, they accused them of infringing multiple patent rights and sought compensation for damages. PocketPair responded claiming they were unaware of any patents they violated and that they were not notified of which patents they were accused of infringing.

Contrary to popular belief, the Pokémon franchise was not the main inspiration for Palworld. According to PocketPair CEO Takuro Mizobe, the game was actually based on Ark: Survival Evolved, which also had monster companions in the form of dinosaurs. Similarly, the survival mechanics and in-game tasks were inspired by Rust, and the creature designs were inspired by the Dragon Quest series.

A Neutral type Pal in the game, Lovander, is noticeably more adult-oriented compared to other Pals seen in the game. Its design is rather feminine-leaning (being a pink salamander-esque creature with a massive heart on its chest and groin), its number in the game's Paldex is 69, and its data in said Paldex states the following:


Additionally, when Lovander dies, it has a chance of dropping items known as "Strange Juice" and "Suspicious Juice", as well as Cake, an item required to initiate breeding between 2 Pals.