Three Rings Design, Inc. was founded in March 2001 by Daniel James and Michael Bayne. After discussions between the two, one of the concepts that Daniel had put forward, an MMOG driven by action puzzles, was chosen as Three Rings' first project, and development started in July of 2001, the end product was Puzzle Pirates.

The name Three Rings is derived from Tolkien mythology: in those stories, the elves created three magic rings, named Vilya, Narya and Nenya. These names appear from time to time in Puzzle Pirates. Narya is also the name given to Three Rings' open-source Java library , containing "facilities for making networked multiplayer games."

The staff of Three Rings Design included the Agents (Whirled), Ocean Masters (Puzzle Pirates), and Game Masters (Spiral Knights), who are responsible for customer service, moderation and policing within Three Rings' games and perform similar functions to Game Masters in other games, and Ringers, who are responsible for the development and maintenance of Puzzle Pirates, Bang! Howdy, Whirled , and Spiral Knights.

Prior to starting Three Rings, in 1995 Daniel James made an attempt at bidding for the rights to make an MMORPG based on the Lord of the Rings. This company would have been called Three Rings Internet Productions but never got underway due to legal wrangling.

Three Rings was declared defunt in March 2016, when SEGA reduced its San Francisco R&D staff.