GCC had also designed a 'high score cartridge,' a battery-backed RAM cart designed for storing game scores. Atari manufactured none of these accessories, and after the initial production run they also eliminated the expansion port. In 1987, the Atari XEGS was released and it came with a light gun, called the XG-1. The XG-1 was fully compatible with the 7800 and the 2600, and Atari released four games on the 7800 that utilized this peripheral.

The 7800 was test-marketed in southern California in June 1984. One month later, Warner Communications sold Atari to Jack Tramiel, who did not want to build a video game console. He pulled the plug on all projects related to video games and decided to focus on Atari's existing computer line in order to begin development of the new 16-bit computer line (which appeared as the Atari ST). The 7800 was re-introduced in winter 1986 after the success of the Nintendo Entertainment System proved that the video game market was still viable. Unfortunately, by the time the 7800 made it to market, the NES had 90% of the market cornered and the rival Sega Master System had most of what was left.

The Atari 7800's technical superiority is still debated today. The architecture is essentially just an Atari 2600 with a slightly better CPU and an advanced graphics chip (MARIA). While the system could handle far more moving objects on screen (up to 100) than any of its competitors, its audio capabilities were limited due to lack of board space. The designers allowed games (notably ports from the Atari 400/800 computer line) to include a POKEY audio chip in the cartridge. Only two games, Ballblazer and Commando used the POKEY chip. The 7800 was also more difficult to program than other systems available at the time, though this was tempered by the fact that many game programmers at the time were already well versed in the 2600.

The 7800 faced the severe software drought that would become the mark of all Atari consoles sold after the video game crash. Relatively few titles were released by Atari, many of them unpolished and lacking in features, or even games that already were in previous Atari systems. And there was virtually no effort by Atari to recruit third party developers, aside from a few titles from Absolute, Activision, and Froggo.