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On March 16, 2000, LucasArts Entertainment announced a partnership with Verant Interactive Inc. and Sony Online Entertainment to create the first massively multiplayer Star Wars online role-playing game. The then unnamed game would be developed by Verant with online play supported by SOE. This was the same team responsible for creating and supporting the popular Everquest massively multiplayer online game. LucasArts would be responsible for all distribution of the Star Wars online game. The announcement included an expected release date some time in 2001 and that the game would take place during the classic trilogy Star Wars era.

LucasArts officially announced the brand name of the game to be title Star Wars Galaxies on November 29, 2000. The announcement claimed the first round of testing for Star Wars Galaxies was expected to start in late 2001 which would push back the official release date to an unknown time. The game's official information site was launched on November 30, 2000 in conjunction with SOE and featured frequently asked questions about the game and message boards fielded by members of the development team.

"We see this Web site as an important step toward building a strong community for the Star Wars Galaxies line of games. We firmly believe that consistent and open communication with fans will be one of the keys to the success of the Star Wars Galaxies experience."

―Simon Jeffery, president of LucasArts

On May 17, 2001, even before the game went into public beta testing, the first expansion's development was announced. The yet unnamed add-on, which was expected to be available six months after the initial product release, would be a space simulation and enable players to own and fly starships which would allow interplanetary travel and space combat. The release date of the initial product, the ground-based component, was updated to the second half of 2002. The staggered release schedule of the space component of the Star Wars Galaxies series was said to benefit players because they would have time to establish their characters and explore different elements of the core game before adding the space layer. Traveling between planets would be accomplished through the use of public shuttles, which would ferry characters from world to world.

A new official site was also released on the same day that put more of an emphasis behind the community of the game. It included new screen shots, movies, an updated FAQ, concept art, development team member's profiles, features about the game, and a new forum. The site reached 100,000 users by December 2001. Throughout the next year after the release of the new site, new content would be revealed. This content included information on species and locations, new images and movies of different game elements, and 360 degree QuickTime VR panoramas of different locations.

Verant began accepting applications from users in May 2002 who were interested in participating in a closed beta test for SWG. The closed beta test would begin in July 2002. SOE would share more information on the game as the beta moved forward. This would include more screen shots, information on match making services, the fact that players would be permitted only one character per server, and skill trees and how the skill-based system would function. LucasArts also announced on May 20, 2002 that both the Xbox and PlayStation 2 would get a version of the game, but these would later be cancelled.

2002 ended with LucasArts officially confirming a release date of April 15, 2003. They also announced on December 20, 2002 that the ground-based component of Star Wars Galaxies would be called An Empire Divided and that the game's online community had grown to over 400,000 users since its original release in November 2000. This represented one of the largest ever fan communities amassed for any game prior to retail availability.

An Empire Divided would later be delayed to an unknown time, but on June 17, 2003, LucasArts confirmed Star Wars Galaxies: An Empire Divided would be released on June 26, 2003.

With a Star Wars license and veteran designer Raph Koster at the helm, expectations among gamers ran high during the development of Galaxies. Many industry professionals expected that these forces would push the subscription numbers past the one million mark. As development wore on, the release date was pushed back, features were cut, and Sony canceled planned ports for the Xbox and PlayStation 2.

The base game, An Empire Divided, was released in the United States on June 26, 2003 to mixed reviews. Galaxies was most criticized for numerous bugs and broken features that plagued the game. After release, the developers continued working on the features cut during the delay. In November 2003, two of those most anticipated features, creature mounts and player-created cities were enabled. Also, on November 7, 2003 it was announced that the first player had unlocked a Force-sensitive character slot needed to become a Jedi.

On November 7, 2003, An Empire Divided was released in Europe. A localized version for the Japanese market was published by Electronic Arts Japan on 23 December 2004. However, Japanese acceptance of the game was low, and in November 2005 the servers were shut down and existing accounts migrated to US servers.