Initially, most of Free Radical Design's employees previously worked for the game developer Rare. While at Rare, they (David Doak, Steve Ellis, Karl Hilton, Graeme Norgate and Lee Ray) worked on the Nintendo 64 first-person shooters GoldenEye 007 and Perfect Dark. From late 1998 to early 1999, this team left Rare to form Free Radical Design, which was established in April 1999, their first release being TimeSplitters for the PlayStation 2 in 2000. It was known for its very fast-paced gameplay and its particular emphasis on multiplayer rather than story.TimeSplitters attracted attention at the time because of the former Rare employees' work on the critically acclaimed GoldenEye 007. Its sequel TimeSplitters 2 became the highest-ranked first-person shooter on the PlayStation 2.
Free Radical design was working on Star Wars Battlefront III from 2006 to 2008, but it became cancelled when it was 99 percent complete. The cancellation of this title contributed to Free Radical Design going into administration. On 18 December 2008, it was reported that the studio had shut down, though it was later confirmed that the company had gone into administration, leaving 40 of the original 185 staff still employed. On 3 February 2009, Haze scriptwriter Rob Yescombe announced that Free Radical Design had been purchased by German games developer Crytek which was then confirmed by Crytek themselves the following day. In 2010, the company moved from Sandiacre to brand new offices in the new central Nottingham Southreef development. The £50 million investment will allow Crytek UK to "grow over the next few months".
In June 2014, reports surfaced that Crytek had missed wage payments and withheld bonuses for the company's employees, and that as a result, a number of employees had filed grievances and refused to report to work, and at least 30 employees had left the company since 2011 alone due to a decreasing morale at the studio. After denying that there were issues, Crytek later admitted on 25 July 2014 that the company was in a "transitional phase" as it secured capital for future projects, with a particular emphasis on online gaming.
On 30 July 2014, Crytek announced that due to an internal restructuring, it would sell the intellectual property of Homefront (a game of which the studio was currently in development of a sequel Homefront: The Revolution), to Koch Media, parent company of video game publisher Deep Silver, and lay off much of the company's staff. Crytek left it unclear whether the company had been shut down entirely, however all staff were transferred to the new Dambuster Studios being established in Nottingham in accordance with British law and will continue to work on Homefront: The Revolution.