Commander Keen in Keen Dreams [Model 04-30446]

In October—December 1990, a team of employees from programming studio Softdisk, calling themselves Ideas from the Deep, developed the three-part video game Commander Keen in Invasion of the Vorticons. The group, who worked at Softdisk in Shreveport, Louisiana developing games for the Gamer's Edge video game subscription service and disk magazine, was composed of programmers John Romero and John Carmack, designer Tom Hall, artist Adrian Carmack, and manager Jay Wilbur. After the release of the game in December, and the arrival of the first US$10,500 royalty check from shareware publisher Apogee Software, the team planned to quit Softdisk and start their own company. When their boss and owner of Softdisk Al Vekovius confronted them on their plans, as well as their use of company resources to develop the game—the team had created the game on their work computers, both in the office after hours and by taking the computers to John Carmack's house on the weekends—the team made no secret of their intentions. Vekovius initially proposed a joint venture between the team and Softdisk, which fell apart when the other employees of the firm threatened to quit in response, and after a few weeks of negotiation the team agreed to produce a series of games for Gamer's Edge, one every two months. Ideas from the Deep, now founded as id Software, used some of these games to prototype ideas for their own releases, such as Catacomb 3-D. In late spring of 1991 they worked on a new Keen game in order to develop new systems for their next major release in the Commander Keen series. They did not initially want to do a Keen game for Softdisk, but eventually decided that doing so would let them fulfill their obligations while also helping improve the next full set of games for Apogee.

For Invasion of the Vorticons, John Carmack and Romero focused exclusively on the programming, while Adrian Carmack joined late in development and had a personal art style that did not match with the game. As a result, the game was largely shaped by designer Tom Hall's personal experiences and interests. Keen's red sneakers and Green Bay Packers football helmet were items Hall wore as a child, dead enemies left behind corpses due to his belief that child players should be taught that death had permanent consequences, and enemies were based loosely on his reading of Sigmund Freud's psychological theories, such as that of the id. For Keen Dreams, the team reprised their roles, and used the game as a prototype for what they wanted to change for the next Keen games for Apogee: an increase in graphical quality with parallax scrolling to make the background move at a different speed than the foreground, a pseudo-3D view rather than a side-on view, ramps rather than solely flat surfaces, support for sound cards, and changes to the design based on player feedback. The game's plot, as a result, was designed to be a standalone game outside of the continuity of the main series, and not a true sequel.

For Vorticons, Carmack had created adaptive tile refresh to produce a scrolling effect on computers not powerful enough to redraw the entire screen when the player moved. For Keen Dreams, he wanted to scroll the background at a different rate than the foreground, but again computers of the time were not powerful enough to do so smoothly. To implement parallax scrolling without having to manage all of the elements moving past each other, he came up with a plan to instead save combinations of overlapping foreground and background elements in memory and display the appropriate combination for where Keen was on the screen, so that the game only needed to pick the correct image rather than recalculate what that image would be.

Hall, meanwhile, had received feedback from parents who did not like that the enemies in Vorticons left behind corpses instead of disappearing like in other games; he did not want the violence to have no effects, and so in Dreams replaced the raygun with pellets that temporarily stunned enemies. He was not satisfied with this change, and for the next games added in a stun gun instead. He also removed the pogo stick from the game, both to symbolize that Keen was in a nightmare and therefore felt less empowered, and also to make designing the levels easier as vertical motion did not need to be as accounted for. Once the parallax scrolling and design changes were completed, Keen Dreams was completed in less than a month even as the team simultaneously worked on another game. The level maps were designed by Tom Hall and John Romero, using a custom-made program called Tile Editor v5.0 (TED5), which they used for the entire Keen series as well as several other games. Bobby Prince had planned out an introductory cinematic with an accompanying song titled "Eat Your Vegetables", but it was rejected as it would have made the game too large to fit on a single floppy disk. The story introduction was instead done in plain text, and "Eat Your Vegetables" was repurposed as stage music for Commander Keen in Goodbye, Galaxy.