Playground Games began conceptualising the game in 2014 following the release of Forza Horizon 2. Additional work was provided by Turn 10 Studios, who produced the Forza Motorsport series. The game used the ForzaTech game engine. Creative director Ralph Fulton described the result as a "generational leap" over its predecessor. The development team aimed to give players more freedom and to reduce loading screen time, which they felt could damage the impression of a persistently high-quality experience.
Australia was selected for its largely diverse environment, with the development team considering it a possible setting for future games in the series. A team was sent to Australia to take reference photos of plants, rocks, and road details for use in the game design. Significant effort was invested in simulating landmarks such as the Twelve Apostles, while minor details including the colours of Australian phone boxes and garbage bins were also implemented. Playground Games stated they explored every ecologically distinct region of the country; the gameplay world consists of six distinct regions. The world is acknowledged to be geographically inaccurate by design, to create a better gameplay experience.
Australian car culture was deliberately celebrated in the game. Designer Mike Brown described Australia's diverse scenery as "perfect" for the setting. Ralph Fulton noted that the culture of Ford versus Holden and the prevalence of V8s and Utes would add colour to the game for international players. Locations include the desert town of Coober Pedy, the Great Ocean Road in Victoria, Byron Bay in New South Wales, Ormiston Gorge in the Northern Territory, and Surfers Paradise in Queensland.
High-dynamic-range (HDR) became a key visual feature after the development team discovered the HDR output of the Xbox One S. ForzaTech's light rendering was found to be well-suited to HDR. The team purchased multiple televisions to investigate the feature, discovering significant variation in how they displayed HDR.
For the sky system, teams were sent to Braidwood, New South Wales, where HDR cameras captured Australia's skies, clouds, and weather patterns across 24-hour periods and through varying weather conditions. The footage amounted to around 30 days in total. As a result, days were longer in Forza Horizon 3 than in its predecessor, and clouds correlate with in-game weather systems. Lighting in the game is calculated with real-time computing, and a voxel-based global illumination system calculates the bouncing of light.
Playground Games worked with Rare, then developing Sea of Thieves, to create realistic sea interaction with the beach, with both studios sharing computer code.
Car models were primarily designed using CAD data exchanged with manufacturers. For rarer and older vehicles, designers located the cars directly for modelling reference. For the Lamborghini Centenario, the cover car, a photographer was sent to Italy for photos and measurements. The sound team recorded actual cars for intake, engine, and exhaust sounds, using a looping model from Forza Motorsport 6 alongside a granular synthesis model. Vehicle recording was carried out by Warner Bros. Post Production.
The gameplay world is approximately twice the size of Forza Horizon 2. Three racing modes are available: Exhibition, Championship, and Rivals. The newly introduced Horizon Blueprint feature allowed players to customise races and Bucket List Challenges. Returning from previous Forza games, Drivatars learn and mimic the driving habits of real players and appear throughout the open world. Players can recruit Drivatars to a racing team to earn additional experience, fans, and in-game currency. A total of 350 vehicles were available at launch. Volkswagen vehicles were absent from the game due to licensing issues.
Playground Games conducted a study of first impressions before developing the opening sequence. A test found that subjects who played in a sports car rated the game higher than those given a regular car. Around eighteen months of development were dedicated to curating the opening few scenes. The route for the opening drive was tested from June 2015 onwards and iterated upon; the Centenario was found to be too fast for players to observe the scenery as intended, requiring route changes and a cutscene switch to a buggy for off-road sections.
The four-player cooperative campaign was designed with four primary problem areas in mind: players being at different stages of campaign progress, car requirement mismatches, skill disparities, and a lack of guidance from the session leader. Solutions included a rental feature for cars, conversion of all races to team format against AI opponents, a points system for each AI opponent beaten, and a notification system for the session leader's actions.
Forza Horizon 3 was announced on 13 June 2016 at Microsoft's E3 press conference and released on 27 September 2016. Three editions were available: Standard, Deluxe, and Ultimate. Pre-ordering the Ultimate Edition granted early access from 23 September. The game supports cross-platform play as part of the Xbox Play Anywhere programme.
Performance problems affecting Windows compatibility emerged at launch and were subsequently fixed. An update in January 2017 had the potential to corrupt the game for Windows users and was removed. In January 2018, the game was ported to the Xbox One X, enabling 4K resolution and enhanced graphics. The ability to stream custom soundtracks via Groove Music ended on 31 March 2019 after Groove Music was discontinued. On 27 September 2020, the game and all downloadable content were removed from the Microsoft Store after reaching end-of-life status.
Several DLC car packs were released periodically, including themed collections such as the Motorsport All-Stars Pack and the Porsche Car Pack. The Hoonigan Car Pack included cars used by the Hoonigan Racing Division.
The Blizzard Mountain expansion, released on 13 December 2016, added a mountainous region with snowy weather conditions including icy roads and whiteout effects. Players collected stars instead of fans to unlock events, and three additional racing modes were introduced alongside a rally/off-road car pack.
The second expansion, Forza Horizon 3: Hot Wheels, released on 9 May 2017 in collaboration with Mattel, added an archipelago connected by Hot Wheels stunt track pieces featuring vertical loops and half-pipes. Races could be customised using the Horizon Blueprint feature.
Two crossovers were included. Players could obtain Halo's fictitious Warthog by playing Halo 5 or The Master Chief Collection on Xbox One. On 1 August 2017, the Quartz Regalia from Final Fantasy XV was made available through the in-game message system. Programming the Regalia took approximately 1,500 hours due to the absence of real-world reference data.
Forza Horizon 3 received "universal acclaim" for the Xbox One version and "generally favorable" reviews for the Windows version, according to Metacritic. Critics praised the Australian setting for its diversity and attention to detail, including street signs and road markings. GameSpot noted the prominence of off-road activities as a result of the location.
Reviews of the races were mixed. Some critics found them thrilling and a step forward from the predecessor; others criticised head-to-head races against Drivatars for being too easy or imbalanced, and found Championship mode repetitive. The Drivatar system was described by PC Gamer as "broadly effective" and considered a good alternative to traditional rubber-band AI. The Horizon Blueprint feature was praised for its creative flexibility.
Critics highlighted the volume and variety of content, with some comparing the campaign to Burnout Paradise. The game's graphics were well received, with particular praise for the global illumination system and day-night cycles.
Ralph Fulton noted that sales exceeded the expectations of Playground Games. The game was the seventh best-selling title in Australia and tenth in the United Kingdom in 2016, and the ninth best-selling on Xbox One in the United States that year. More than 2.5 million copies were sold by February 2017, contributing to the Forza series reaching $1 billion in cumulative sales. By September 2018, the game had surpassed 10 million players.
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