Undead Labs was founded on November 23, 2009, by Jeff Strain, with the sole focus on zombie-based games.[2] On February 3, 2011, Undead Labs announced that they were partnering with Microsoft Game Studios to publish their games on the Xbox 360 and now also the Xbox One.[3] This decision was made after most of the other publishers who showed interest in their games were requesting what they described as "World of Warcraft clones".[4] The first game State of Decay was released on the Xbox 360 on June 5, 2013, and on Microsoft Windows on November 5, 2013.[5][6][7]
On January 11, 2014, it was announced that Undead Labs has signed a multi-year, multi-title agreement with Microsoft Studios.[8] Jeff Strain stated that the first State of Decay was "just the start of (Undead Labs') long-term ambitions", and spoke of many future titles potentially entering the franchise.[9]
At E3 2018, Microsoft announced they had entered into an agreement to acquire Undead Labs into Microsoft Studios.[11] In 2020, the studio announced their next title State of Decay 3 for Xbox Series X/S and PC.[12] In July 2021 Undead Labs opened a second studio in Orlando, Florida focused on developing animation technology in Unreal Engine 5 for Undead Labs as well as for other studios under the Xbox Game Studios banner.[13] Strain left the company by October 2021 and founded another studio, Possibility Space.[14]
A 2022 investigation by Kotaku reported on a sexist studio culture, which was abetted by Philip Holt, the new studio head who replaced Strain, and then-head of HR Anne Schlosser.[15] Schlosser was removed after a Microsoft HR investigation. The toxic work environment, which continued after Schlosser's departure, led to a high employee turnover rate, especially among experienced staff. These issues, combined with a lack of design vision, contributed to extensive delays in the development of State of Decay 3.[15] Employees also blamed Microsoft for not living up to its goals of diversity, equity, and inclusion by not responding to reports of abuse in a timely manner.[15]
On June 9, 2024, Undead Labs was rebranded with a new logo and website following the Xbox Showcase, where the company showed its first gameplay trailer for State of Decay 3.[16]