The studio was formed in 2021, and its debut title, the action game Gang of Dragon, was announced in December and described as deep into development. It was set to star Ma Dong-seok, the South Korean-American actor known for Train to Busan, The Outlaws and Marvel's Eternals.

The closure follows an earlier Bloomberg report that employees were told in March that NetEase intended to cut off funding for the project, allegedly after discovering it needed an additional ¥7 billion, around $44.4 million, to reach completion. In a 2023 interview, Nagoshi had promised fans of his previous games that they would be happy with his new studio's debut.

Nagoshi Studio is the latest casualty of NetEase scaling back its international development operations. Several studios have closed or sought new funding, including Worlds Untold, founded by Mass Effect writer Mac Walters, Seattle's Jar of Sparks, and Ouka Studio, the Tokyo developer behind Visions of Mana, which shut in 2024. Others, such as Grasshopper Manufacture and Hiroyuki Kobayashi's GPTRACK50, have pushed ahead with new games without NetEase funding.