Following the The Great Video Game Crash of 1983, Atari was losing money hands over first and its corporate owner, Warner Communications, made the decision to keep the profitable coin-op division while disinvesting from the failing consumer segments. As part of the restructure, Warner kept the rights to use the Atari name for arcade games, projects that were in development during the split, and most of the game development staff while former Commodore president Jack Tramiel acquired the consumer hardware divisions and the rights to the pre-1985 library, which he would manage through a new company named Atari Corp. The reformed Atari Games was formally be established in 1985 and carried on development of arcade games.

Atari Games had a convoluted ownership history, going from Warner, to a joint-ownership setup with Namco, to effectively independent, back to Time Warner ownership again. This ended in 1996 when Time Warner decided to disinvest from the video game market entirely and sold Atari Games to Midway Games. Midway let Atari Games operate independently for a time before renaming it to "Midway Games West" in 1999, and shuttered it entirely in 2003. After Midway Games West's closure, Midway continued to make games based off Atari Games' properties (most prominently the Gauntlet series) and include titles from the Atari Games back catalogue in compilations alongside Midway's own titles.

While Atari Games could still use the Atari name for arcade releases, it could not do so for the home market. A subsidiary called Tengen (named so in reference to the center point of the Go (Board Game), a sly clue to its origins) was established to publish games for home console, including both ports of the company's arcade games and titles developed by other companies. Tengen famously tangled with Nintendo twice, first over the home console rights for Tetris and later over Tengen's (successful) attempts to circumvent the Nintendo Entertainment System's lock-out scheme. The division was renamed "Time Warner Interactive" in 1994 and merged with Midway's existing home distribution assets in 1996.

Famous games developed by this incarnation of Atari include Road Runner, Hard Drivin', the 1989 arcade version of Tetris, San Francisco Rush, and Primal Rage (1994). . After Midway went out of business in the late 2000s, its library was bought out by Warner Bros., including the Atari Games catalogue. New releases after that point included Midway Arcade Origins, which featured several Atari Games-developed titles, and an unsuccessful 2014 reboot of Gauntlet. A Paperboy and Spy Hunter crossover comic was also published in 2021.

Games made by Atari Games after splitting off from the original Atari post-crash

• 720°
• APB (1987)
• Area 51 (Arcade)
• Awesome Possum... Kicks Dr. Machino's Butt
• Blasteroids
• California Speed
• Cyberball
• Dragon's Revenge
• Dr. Muto (the final game with any staff continuity to the original Atari)
• Escape from the Planet of the Robot Monsters
• Gauntlet
  • Gauntlet
  • Gauntlet II
  • Gauntlet: The Third Encounter
  • Gauntlet IV (co-produced with M2)
  • Gauntlet Legends
• Guardians of the 'Hood
• Hard Drivin'
  • Race Drivin'
• Hydra
• Indiana Jones and the Temple of Doom
• Klax
• Mace: The Dark Age
• Marble Madness
• Maximum Force
• Paperboy
• Pit-Fighter
• Primal Rage (1994)
• Rampart
• RBI Baseball series (The English version of Namco's Pro Yakyuu Family Stadium series)
• Rise of the Robots
• RoadBlasters
• Road Burners
• Road Riot 4WD
• Road Runner
• San Francisco Rush
• Space Lords
• Spiritual Assassin Taromaru
• Steel Talons
• STUN Runner
• Tetris (arcade and unlicensed NES versions)
• T Mek
• Toobin'
• Vindicators
• Virtua Racing (Sega Saturn port)
• War: Final Assault
• Wayne Gretzky's 3D Hockey
• Xybots