Indy 500 was released in Japan in July 1995, and to other regions by the end of the year. The game was originally developed for the Sega Model 3 arcade board, but due to delays in the board's development it was instead released on the Sega Model 2, specifically the Model 2B variant first used in Sega Rally Championship. For this reason, Nakagawa credits the game as his most memorable project with AM1. According to Nakagawa, Indy 500 was the first time AM1 was able to develop color textures and gave the team experience in developing games in 3D.

The game was AM1's second project using 3D computer graphics, after 1994's Wing War. Indy 500 was developed by Sega AM1, an arcade research and development division of Sega led by Rikiya Nakagawa. A hidden feature in the game allows players to race as the pace car. Up to eight players can compete in multiplayer, via a feature where multiple arcade cabinets can be linked. Racing speeds are up to 380 kilometres per hour (240 mph), and up to 420 km/h (260 mph) while in a slipstream. Įach race begins with a rolling start, and players are tasked with racing against opponents and a timer in a three lap event, needing to make it to the next checkpoint before the timer ends. Similar to previous Sega arcade racing games, the game can be played from one of four different camera angles. Special features of the cabinet include a steering wheel with haptic feedback. The race commences after the user has made their choice of automatic transmission or manual transmission with a 2-position shifter, capable of selecting 6 speeds. Players can race one of three courses: Indianapolis Motor Speedway (called Indy 500 in the game), Highland Raceway, and Bayside Street, the latter two being fictitious courses. Indy 500 is a racing game based on Ind圜ar, and possesses an official license from the Indianapolis Motor Speedway. An Ind圜ar, controlled by the player, drives around the Indianapolis Motor Speedway.

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