The Jaguar was the last game system to be marketed by Atari Corp. Flare Technology, a company formed by Martin Brennan and John Mathieson, said that they could not only make a console superior to the Sega Mega Drive (also called the Sega Genesis) or the SNES, but they could also be cost-effective.  Impressed by their work on the Konix Multisystem, Atari persuaded them to close Flare and, with Atari Corp. providing the funding, to form a new company called Flare II.

Flare II initially set to work designing two consoles for Atari Corp. One was a 32-bit architecture (codenamed "Panther"), and the other was a 64-bit system (codenamed "Jaguar"); however, work on the Jaguar design progressed faster than expected, so Atari Corp. canceled the Panther project to focus on the more promising Jaguar.

The Jaguar was introduced in November 1993 for a sale price of $249.99, under a $500 million manufacturing deal with IBM. The system was initially marketed only in the New York City and the San Francisco Bay areas. A nationwide release followed in early 1994.

The system was marketed under the slogan "Do the Math", claiming superiority over competing 16-bit and 32-bit systems. Initially, the system sold well, substantially outselling the highly hyped and publicized 3DO, which was also released during the holiday season of 1993; but the Jaguar was unable to sustain sales momentum past the holiday season. Among the factors contributing to forestalling sales: lackluster gaming library, due to poorly received launch titles; and Atari's history from its decade earlier 2600 console, which irreparably tarnished the firm's reputation in the eyes of retailers and would-be customers.

Jaguar did earn praise with milestone hits, such as Tempest 2000, Doom, and Wolfenstein 3D. The most successful title was Alien vs. Predator. Both it and Tempest 2000 are often considered the system's defining titles. With such a small library of games to challenge the incumbent 16-bit game consoles, Jaguar's appeal never grew beyond a small gaming audience. Customers also complained the Jaguar controller was needlessly complex, with over 15 buttons.

Lack of titles was attributable to two main factors: the Jaguar's questionable long-term prospects among third-party game-publishers, and the problematic nature of developing games for the Jaguar. Atari had one opportunity to convince third-party developers, vital for the diversity of Jaguar's game library, with a solid retail-performance, but as things played out, post-holiday sales figures questioned the viability of Atari's business; merely outselling the niche 3DO-system (which cost almost three times as much as the Jaguar) failed to attract third-party developers already committed to other game platforms. In addition, the Jaguar's underlying hardware was crippled by a flaw in the CPU's memory controller, which prevented code-execution out of system RAM. Less severe, but still annoying defects included a buggy UART. The controller flaw could have been mitigated by a mature code-development environment, to unburden the programmer from having to micromanage small chunks of code. Jaguar's development tools left much to the programmer's imagination, as documentation was incomplete. And so writing game-code was often an endurance exercise in the tedious assembler.

By the end of 1995, the Jaguar's fate was all but sealed. Atari's revenues declined by more than half, from 38.7 million dollars in 1994 to $14.6 million in 1995. In late-1995, Atari Corp. ran early-morning infomercial advertisements with enthusiastic salesmen touting the powerful game system. The infomercials ran most of the year, but did not significantly sell the remaining stock of Jaguar systems. In their 10-K405 SEC Filing, filed 4/12/1996, Atari informed their stockholders of the truly dire nature of the Jaguar business:

From the introduction of Jaguar in late 1993 through the end of 1995, Atari sold approximately 125,000 units of Jaguar. As of December 31, 1995, Atari had approximately 100,000 units of Jaguar in inventory.

In an interview, Sam Tramiel, CEO of Atari Corp. and son of Jack Tramiel, had declared that the Jaguar was much more powerful than the Saturn and slightly weaker than the PlayStation. He also predicted the PlayStation to enter the US market at a retail price of $500, and that any price below $300 would constitute price dumping, an illegal market tactic that Atari would challenge in court. When Sony's Playstation launch into the US market, the $299 price-point swept the market. No lawsuit was forthcoming from Atari, and Tramiel's comments were selected as #3 in GameSpy's Top 25 Dumbest Moments in Gaming.

Production of the Jaguar ceased after Atari Corp. merged with JT Storage in a reverse takeover. In a last ditch effort to revive the Jaguar, Atari Corp. tried to play down the other two consoles by proclaiming the Jaguar was the only "64-bit" system. This claim is questioned by some, because the CPU (68000) and GPU executed a 32-bit instruction-set, but sent control signals to the 64-bit graphics co-processors (or "graphics accelerators"). Atari Corp.'s position was that the mere presence of 64-bit ALUs for graphics was sufficient to validate the claim. Design specs for the console allude to the GPU or DSP being capable of acting as a CPU, leaving the Motorola 68000 to read controller inputs. In practice, however, many developers used the Motorola 68000 to drive gameplay logic.

Over the short life of the console, several add-on peripherals were announced. However, only the ProController, the Atari Jaguar CD drive and the JagLink (a simple two-console networking device) reached retail shelves. A voice modem and VR headset (with infrared head-tracking), existed in prototype form, but were never commercialized. (See Loki and Konix Multisystem for early development.)

After the Atari Corporation properties were bought out by Hasbro Interactive in the late 1990s, Hasbro released the rights to the Jaguar, declaring the console an open platform and opening the doors for homebrew development. A few developers, including Telegames and Songbird Productions, have not only released previously unfinished materials from the Jaguar's past, but also several brand new titles to satisfy the system's cult following. The most recent release is the arcade-style game "Mad Bodies" by Force Design on May 2, 2009.