Three Rings Design, Inc. was founded in March 2001 by Daniel James and Michael Bayne. After discussions between the two, one of the concepts that Daniel had put forward, an MMOG driven by action puzzles, was chosen as Three Rings' first project, and development started in July of 2001.

The name Three Rings is derived from Tolkien mythology: in those stories, the elves created three magic rings, named Vilya, Narya and Nenya. These names appear from time to time in Puzzle Pirates. Narya is also the name given to Three Rings' open-source Java library, containing "facilities for making networked multiplayer games." Narya is used with other Three Rings and open-source technologies to power Three Rings' Game Gardens site.

The current staff of Three Rings Design include the Time Masters (Doctor Who: Worlds in Time), Game Masters (Spiral Knights), Agents (Whirled), Sherrifs (Bang! Howdy) and Ocean Masters (Puzzle Pirates), who are responsible for customer service, moderation and policing within their respective games and perform similar functions to Game Masters in other games, and developers who are responsible for the development and maintenance of Puzzle Pirates, Bang! Howdy, Whirled, Spiral Knights, and Doctor Who: Worlds in Time.

Prior to starting Three Rings, in 1995 Daniel James made an attempt at bidding for the rights to make an MMORPG based on the Lord of the Rings. This company would have been called Three Rings Internet Productions but never got underway due to legal wrangling.

In November 2011, SEGA acquired Three Rings and it continues to exist as a self-contained game development studio within the SEGA family.

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