Following the mixed reception for 2012's Resident Evil 6, leveling at 40-50%, an internal discussion took place among the producers and directors in R&D Division 1 about how to re-format the series. When Resident Evil 7 was reconsidered following several failed pitches, it was agreed that it would be stripped down to its "core" elements, earlier titles such as Resident Evil 5 and Resident Evil 6 having worked too much for a blockbuster. Along with the greater focus on atmosphere, it was decided that a new character would be introduced, "macho superheroes" such as Chris Redfield and Leon S. Kennedy having partly been responsible for the more actionized content.
Development officially began sometime in early 2014. Problems were met at E3 2014 when the (now cancelled) Silent Hills game released a demo that was similar to what was planned for Resident Evil 7, leading to fears the new game would be seen as a rip-off. The game was, however, not changed and a demo appeared at E3 2015 under the name "KITCHEN", though its links to Resident Evil were kept secret. The game was finally announced during the E3 2016 gaming convention on June 14, 2016 as a part of the series' 20th Anniversary. The game was officially released overseas on January 24, 2017, launching in Japan two days later on the 26th.
Capcom later revealed that the teaser is a prologue, a standalone experience and won't be featured the final game "in that exact form". The full game will feature a different protagonist than the ones in the demo and offer more variety in its environments and additional mechanics and features not found in the demo, such as combat (gun-play and melee weapons), resource management and solving puzzle solving. It was also confirmed by the game's producer Masachika Kawata that the game will feature classic Resident Evil staples such as healing herbs and other classic items.
Director Koshi Nakanishi and producer Masachika Kawata were later interviewed once again by Capcom Unity and revealed that the game will be different from the teaser demo even if viewers get the cult and ghost game feeling from the trailler and teaser demo and that there will be a theme of mystery in the actual game and that is what they are trying to do with the teaser and trailer, they also confirmed that quick-time events (first introduced in Resident Evil 4) won't be featured in this game.