Prior to founding Hazelight, Josef Fares was a film director. His first video game project was Starbreeze Studios' Brothers: A Tale of Two Sons, which received critical acclaim when it was released in 2013. Following the success of Brothers, Fares decided to found a new video game production company based in Stockholm, Sweden, with the focus of creating a mature, story-focused game. He was joined by the core Brothers development team from Starbreeze, which included Claes Engdal, Emil Claeson, Anders Olsson and Filip Coulianos. The studio was announced at The Game Awards 2014 by publisher Electronic Arts, which also revealed that it would publish the studio's first title. EA allowed Hazelight to share space at DICE so that they can fully focus on creating their game.
The company's first game, A Way Out, was announced by EA at E3 2017. It was part of EA Originals, EA's initiative to support independent games. The program allowed Hazelight to retain full creative control while receiving most of the game's profit after development cost was recouped. EA gave the team a budget of $3.7 million. The game was released in March 2018 and it received generally positive reviews and sold 1 million copies within 2 weeks. The studio partnered with EA again for their next title, It Takes Two, a co-op platform game released in March 2021. The game won several awards during The Game Awards, including best family game, best multiplayer game, and Game of the Year.