Druaga was designed by Masanobu Endo, best known for creating Xevious (1983). It was conceived as a "fantasy Pac-Man" with combat and puzzle solving, taking inspiration from games such as Wizardry and Dungeons & Dragons, along with Mesopotamian, Sumerian and Babylonian mythology. It began as a prototype game called Quest with interlocking mazes, revised to run on an arcade system; the original concept was scrapped due to Endo disliking the heavy use of role-playing elements, instead becoming a more action-oriented game.

In Japan, The Tower of Druaga was widely successful, attracting millions of fans for its use of secrets and hidden items. It is cited as an important game of its genre for laying down the foundation for future games, as well as inspiring the idea of sharing tips with friends and guidebooks. Druaga is noted as being influential for many games to follow, including Ys, Hydlide, Dragon Slayer and The Legend of Zelda. The success of the game in Japan inspired several ports for multiple platforms, as well as spawning a massive franchise known as the Babylonian Castle Saga, including multiple sequels, spin-offs, literature and an anime series produced by Gonzo. However, the 2009 Wii Virtual Console release in North America was met with a largely negative reception for its obtuse design, which many said was near-impossible to finish without a guidebook, alongside its high difficulty and controls.