The initial version of Phantasy Star Online was rushed to meet its intended 2000 release year after an initial delay. As a result, it shipped with several bugs, exploits and unfinished features that couldn't be addressed due to the Dreamcast's lack of a large enough storage medium for patch updates.

In April 2001, Sega announced that an updated version of the original game with new content and improved features would be released as Phantasy Star Online Ver. 2. This new version of the game would be completed in six months.