As part of the marketing of the new Sega Genesis, Sega of America president and CEO Michael Katz planned to create a library of instantly-recognizable titles for the console by contracting with celebrities and athletes to produce games using their names and likenesses. As part of this, Sega signed a US$1.7 million five-year contract with Joe Montana, despite concerns among the Japanese executives that the game would not earn enough to cover this cost.

Since Sega of America did not at the time have a large game production facility and Sega of Japan had never designed a football game, Sega contracted with Mediagenic to develop the game for November 1989. No one at Sega was aware of the turmoil inside Mediagenic at the time; despite five months of reports that development was proceeding on schedule, Katz discovered in September or October that the game was hardly begun. To have a football game for Christmas release, Sega would have to find an already-completed game that could be converted.

Mediagenic did develop a DOS version of the game (contractor Mindspan) and it was published in 1990 ( MobyGames ). The opening video clip was the first commercial use of the video playback system (developed at Mediagenic) that would later be used in "The Return to Zork".

Sega approached Electronic Arts, developer of the Madden NFL series, and president Trip Hawkins agreed to help. Joe Montana Football missed the Christmas deadline and was released in January 1991, shortly after the Genesis version of John Madden Football.

The finished versions of Joe Montana Football and John Madden Football were so different that few would have guessed they were made by the same company. Madden had realistic plays and a full roster of 28 teams, while Montana was a more arcade-style game with only 16 teams and a simplified, passing-intensive offense. Prior to the release of Montana, Park Place had developed the game so well that it surpassed Madden, and they believed it would hurt the sales of Madden. According to Michael Knox, they took Montana and "scaled it back" just before releasing the game back to Sega.

Although not as successful as the Madden series, Joe Montana Football and the sequels (developed by BlueSky Software rather than Electronic Arts) helped establish the Genesis' reputation as the top platform for sports simulations and proved to Sega of Japan that sports games could be worthwhile investments.