The development team wanted the sequel to have more tension. Shinichi Ogasawara was the game's director. AM3 began developing the game in early 1997, after receiving permission from Universal Studios. Additionally hoping that they could make use of Sega's new relationship with Spielberg's company DreamWorks (the two companies were partnered for the GameWorks chain of entertainment venues), producer Mie Kumagai presented her ideas to AM3 president Hisao Oguchi, who approved. Having developed the original Jurassic Park arcade game, Sega AM3, a division of Sega, became interested in making the game after hearing about the film. The Lost World: Jurassic Park is based on director Steven Spielberg's 1997 film of the same name.
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Saving the human results in the human rewarding the player with either a temporary weapon upgrade or additional health. At times, the game presents the player with an opportunity to rescue a human who is being attacked by one or multiple dinosaurs. Pachycephalosaurus, Compsognathus and venom-spitting Dilophosaurus are also encountered throughout the game. Velociraptors are also featured as enemies throughout the game. Boss enemies include Tyrannosaurus, Deinosuchus and Carnotaurus. Four of the levels feature a boss battle that must be won to advance the game.
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The game features five levels based on environments from the film, including a laboratory and a workers' village. Players battle dinosaurs by disabling them with tranquilizer darts. The player controls one of two rangers, whose goal is to find Malcolm and Harding. Ian Malcolm and Sarah Harding go missing after landing on Isla Sorna to conduct an investigation.