Shenmue began development on the SEGA Saturn, and was later reworked for the SEGA Dreamcast. The lengthy development process is one reason the game cost $47 million to make. It was previously thought to cost $70 million, but that was said to be an exaggeration. At the time of its release, it was the most expensive development process in history. The current record belongs to Grand Theft Auto IV, costing around $100 million to develop.

In Ryo's house, under the TV in the main room is a cupboard containing a Sega Saturn. The game is set in 1986, which is about 8 years before the release of the Sega Saturn. This is a reference to the fact that Shenmue was originally designed to be on the Saturn.

During the early stages of development, Shenmue featured a bicycle that could have been used to quickly transverse town.

There is a hidden image inside Xiuying's eyes that acts as the reflection, presumably representing a generic "player" that she is looking at.
The texture for her face is also mirrored on the back of her head, hidden under her hair.

While playing a Dreamcast disc on a device that reads CD files usually produces a warning message, Seaman, Shenmue, and Skies of Arcadia each have unique warning messages on each disc, all provided by the game's voice cast. On Seaman's disc, the voice actor for the Seamen will jokingly warn the player that attempting to play track one will infect their household appliances with viral diseases, and the Skies of Arcadia cast informs the player that they can't save the world while stuck in a CD player. All three Shenmue messages feature different characters from the game warning the player that attempting to play track one (which contains game data) would produce harmful results.

The "Orphaned kitten" was based on game's interior designer Manabu Takimoto's cat "Sasuke". During development, a game designer came by to Manabu's desk and ask to borrow the picture of "Sasuke" when he was a kitten.

Game's producer Yu Suzuki stated, "Ah, I remember that. We called him Sasuke during the planning phase too. We knew it had been modeled after Takimoto’s cat, so we wanted to leave the name as Sasuke, as a remnant of that. (laughs) But eventually someone was like, “Who named this cat Sasuke?!” and we had to change it. (laughs)". In the final version of the game, the "Orphaned kitten's" gender is now female, instead.

In the game's cutscene, "Ryo Hazuki" and "Megumi Mishima" talk about naming the "Orphaned kitten". There's an option to select Manabu's cat's name "Sasuke", if players choose "Sasuke", Ryo will say "So she can grow up to be big and strong like a ninja", but Megumi will not like it, because it's a boy's name. This name cannot be used, as it will result her name to be defaulted as Mimi.

In 2018, in the Discord server of the Japanese gaming blog Gamecast, an anonymous former Sega AM2 developer revealed a previously-unknown Easter egg where at the end of the quick-time event at the New Yokosuka Harbor, if you input Hado Hado + A within 3 frames, you will perform a Shin Shōryūken as used by Ryu in Street Fighter III two years prior to Shenmue's release (Note that "Hado Hado" (or 236 236) refers to performing the command for the Hadoken move from the Street Fighter series by moving the D-pad down, down-right, right in rapid succession, twice in a row).

The developers had originally planned to include this in the game as a tribute, but producer Yu Suzuki stepped in and disabled it from being useable in the final release. For the average player to make the move, it takes 6 frames to perform, but the game lowers the window to successfully perform it to 3 frames, making it impossible to perform under normal circumstances. However, the secret itself was not removed, and would later be discovered and executed by a modder in 2019.

When asked why the Easter egg was added in the first place, the developer added:

In an interview with the game's composer Yuzo Koshiro published in the Japanese book series Game Maestro in 2001, he clarified that while there were dozens of people on the game's music staff, there were only four main composers actually writing and arranging the music, making them the smallest group within the project (this also included people working on sound effects and voice acting). The main theme of the game was written by composer Mitsuyoshi Takenobu. Koshiro believed Takenobu had "the hardest time of us all" during development as he also helped fine-tune the game's music in line with the programmers and director's requests. Koshiro also mentioned that at the beginning of the project, the offer made to get him on the project was that Takenobu would write songs, and Koshiro would orchestrate and arrange them. However, as the project went on, they both went on the opposite direction.