Atari Corp. was founded in July of 1984 when Warner Communications sold the home computing and game console divisions of Atari to competitor Commodore International's recently-resigned founder Jack Tramiel. Warner sold the divisions for $240 million in stocks under the new company.

Under Tramiel's ownership, Atari Corp. used the remaining stock of game console inventory to keep the company afloat while they finished development of their 16-bit computer system, the Atari ST. In 1985, they released their update to the 8-bit computer line—the Atari XE series—as well as the 16-bit Atari ST line. Then in 1986, Atari Corp. launched two consoles designed under the Warner Atari: Atari 2600 Jr and Atari 7800, which had a limited release in 1984. Atari Corp. rebounded, producing a $25 million profit that year. The Atari ST line proved very successful (but mostly in Europe, not the U.S.), ultimately selling more than 4 million units. Its built-in MIDI ports made it especially popular among musicians. Still, its closest competitor in the marketplace, the Commodore Amiga, outsold it 3 to 2. Atari eventually released a line of inexpensive IBM PC compatibles as well as an MS-DOS compatible palm computer called the Atari Portfolio.

In 1989, Atari Corp. also released the Atari Lynx—a handheld console with color graphics—to critical acclaim. However, a shortage of parts kept the system from being released nationwide for the 1989 Christmas season. As a result, the Lynx lost market share to Nintendo's Game Boy, which had only a monochrome display but was widely available. Also in 1989, Atari Corp. lost a $250 million lawsuit alleging that Nintendo had an illegal monopoly.

As the fortunes of Atari Corporation's ST and PC compatible computers faded, consoles and software again became the company's main focus. In 1993, Atari Corp. released its last console: the Atari Jaguar. After a period of initial success, it failed to meet expectations. It was not nearly as powerful as Sony Computer Entertainment's PlayStation or Sega's Saturn and lacked the extensive third party support its Japanese competitors had easily secured for their consoles.