The production team was formed in April 2005, after Konami merged several subsidiaries including Kojima's group at Konami Computer Entertainment Japan. Kojima said the merger relieved him of business management and administrative burdens he had as KCEJ's vice president, and that as head of Kojima Productions he could focus on creating games.

According to Kojima, while he now held a position on the Konami board, he still had to persuade staff to invest in his game ideas.

On March 16, 2015, Konami announced that it had restructured the game development operations to change the production structure to a headquarters-controlled system, "in order to establish a steadfast operating base capable of responding to the rapid market changes that surround our digital entertainment business". A few days later, an anonymous Konami employee stated that Kojima and the studio's senior staff had planned to leave Konami in December 2015 following the conclusion of their contracts and the release of The Phantom Pain. Konami denied that Kojima was leaving the company and stated that he would still be involved with the company and the Metal Gear franchise. Kojima affirmed that he was still "100% involved" in The Phantom Pain and was determined to make it the greatest game he could. In December 2015, the production team was nominated for Developer of the Year at The Game Awards 2015, but lost to CD Projekt Red. Kojima was reportedly blocked from attending the event by Konami's lawyers, requiring Big Boss's actor Kiefer Sutherland to accept the awards for The Phantom Pain on his behalf.

On December 16, 2015, in a joint announcement with Sony Computer Entertainment, Kojima announced that he would start an independent studio—also named Kojima Productions—alongside Yoji Shinkawa and Kenichiro Imaizumi. The studio announced that it would develop a new franchise for PlayStation 4. Kojima stated that he "will be taking on a new challenge by establishing my own independent studio, and I am thrilled to be able to embark on this journey with PlayStation, who I have continued to work with all these past years". In 2016, the studio opened a small division in Amsterdam, near Guerilla Games, who developed the Decima game engine that Kojima uses.

At E3 2016, Kojima unveiled a trailer to Death Stranding during Sony's pre-E3 conference. It was released by Sony Interactive Entertainment in 2019, and a PC version was released by 505 Games on Windows in July 2020. Imaizumi left the company in 2019.

On June 12, 2022, during Microsoft's digital presentation, Kojima announced that it had partnered with Xbox Game Studios to develop a new game featuring a "never before-seen concept" and leveraging Microsoft's "cutting-edge cloud technology". At The Game Awards 2023, Kojima revealed the new game, OD. It was also revealed that Jordan Peele is working with Kojima on the game.