Level-5 was established in October 1998 by Akihiro Hino and his development team at Riverhillsoft, following the release of "OverBlood 2". Since Hino did not originally believe that his team could become an independent developer, he formed a partnership with Sony Computer Entertainment, who would allow him to develop for their upcoming PlayStation 2 under the condition that he set up his own company. The name, "Level-5", was a reference to Japanese school report cards, where "Level-5" is the highest possible mark. Soon after being created, the company had eleven employees.