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Sim racing requires faster computers to run effectively due to its complexity and demands of mimicking real-life driving. A steering wheel and pedals for the throttle and brakes are recommended for immersion, as a gamepad or mouse and keyboard would not provide the same level of immersion and realism. Many sim racing experiences have been developed for consoles, such as the PlayStation and Xbox, and while these games can be played with a controller, investing in a racing wheel and pedals is recommended. The ability to drive against human opponents online and computer AI offline is the closest many come to driving cars on a real track. Even those who race in real-world competition use simulations for practice or entertainment. Continued development of physics engine software and improved hardware, providing tactile feedback, has made the experience more realistic.

Prior to the division between arcade-style racing and sim racing, early attempts at driving simulation experiences were arcade racing video games. This dates back to Pole Position, a 1982 arcade game developed by Namco. Pole Position II was released in 1983, followed by TX-1 in 1983, which placed a greater emphasis on realism and used force feedback technology. Since the mid-1980s, arcade racing games began using hydraulic motion simulator arcade cabinets, sparked by Sega's "taikan" games, such as Hang-On (1985) and Out Run (1986). In 1986, Konami released WEC Le Mans, an early car driving simulator based on the 24 Hours of Le Mans. The first racing game with simulation pretensions on a home system is believed to have been Chequered Flag, released by Psion on the 8-bit ZX Spectrum in 1983, followed by REVS in 1986. 3D polygon graphics appeared in arcade racing simulators with Namco's Winning Run (1988) and Atari's Hard Drivin' (1989).

Sim racing is generally acknowledged to have taken off in 1989 with the introduction of Papyrus Design Group's Indianapolis 500: The Simulation. This game is often regarded as the personal computer's first true auto racing simulation, attempting to simulate realistic physics and telemetry. It also featured a garage facility for vehicle modifications. In 1991, Human Entertainment's Fastest 1 was released for the Sega Mega Drive/Genesis, considered the most realistic Formula 1 racing simulation up to that time. The 1992 release of Formula One Grand Prix by MicroProse moved the genre along significantly, allowing multiplayer via null modem cable. Papyrus followed up Indy 500 with IndyCar Racing in 1993, which sold around 300,000 copies. The first variant of Papyrus' NASCAR Racing series was launched in 1994, selling over one million units and marking the dawn of "real" online sim racing. Network Q RAC Rally was released in 1993 as an authentic sim racer based on rallying, with rally sim racers becoming highly popular after the 1998 release of Colin McRae Rally. IndyCar Racing II was released in 1995, and Grand Prix 2 in 1996. In 1996, NASCAR Racing 2 was released, and the TEN multiplayer hosting service went live in 1997. In 1997, Gran Turismo was released for the PlayStation, introducing the racing simulation genre to home consoles.

Graphics accelerator cards brought a new level of realism to sim racing games, with F1 Racing Simulation by Ubisoft being among the first to utilize this technology in 1997. MicroProse released Grand Prix 3 in 2000. Another milestone came in 1998 with Papyrus’ Grand Prix Legends, based on the 1967 Formula One season. TORCS, an open-source racing sim, was released in 1997. Sega AM2's F355 Challenge (1999) was considered the most accurate simulation of the Ferrari F355. Image Space Incorporated produced Sports Car GT in 1999 and later the officially-licensed F1 series starting in 2000. Sim racing games since the 2000s began exploring more complex vehicle physics implementations, focusing on tire models, suspension, aerodynamics, and internal components. Live for Speed, created by ex-Lionhead Studios developers, was released in 2003 and implemented a complex tire model. Richard Burns Rally by Warthog Games, credited as the first true rallying simulation, was released in 2004. rFactor was released in 2005 by Image Space Incorporated and was notable for its download-only distribution model. David Kaemmer, co-founder of Papyrus Design Group, released iRacing in 2008, a multiplayer-oriented simulator run on a subscription model. Kunos Simulazioni began development on Assetto Corsa in 2010, officially released in December 2014. Slightly Mad Studios launched Project CARS in 2015, a crowdfunded effort. Sim racing experienced an exponential rise in exposure in 2020 following the suspension of global racing series due to the COVID-19 pandemic. Studio 397 and Motorsport Games released Le Mans Ultimate on July 22, 2025.

Online communities and underground racing circuits have grown with international interest, acting as a focal point for users to engage, coordinate racing schedules, exchange modded cars and tracks, and discuss hardware configurations. Esports is an ever-growing topic in the community due to rising competition levels. Some games feature esports events hosted by developers or other organizers, with premier series receiving official developer support and large prize pools. The Fédération Internationale de l'Automobile (FIA) formally incorporated an esports appendix into its International Sporting Code in 2024. Some console racing games, like Gran Turismo and Forza, have featured major esports events. A number of real-world racing series and governing bodies have established officially sanctioned sim racing series, and car manufacturers have also hosted tournaments. Assetto Corsa Competizione previously featured official tournaments hosted by SRO Motorsports Group. Formula One has annually hosted F1 Sim Racing since 2017. iRacing currently hosts numerous esports championships, including official series presented by major car manufacturers and governing bodies.

The growing fidelity of sim racing has led to its adoption in professional motorsport as a talent pipeline for drivers. Some players, such as William Byron, Rajah Caruth, Tim Heinemann, Jann Mardenborough, and Lucas Ordóñez, have established careers through sim racing. Others, including James Baldwin, Cem Bölükbaşı, Igor Fraga, and Chris Lulham, were able to relaunch their careers. It has also become a suitable training tool for drivers like Parker Kligerman, Rikuto Kobayashi, Laurin Heinrich, and Gabriel Bortoleto, who use sim racing as a practice tool. Four-time Formula One World Drivers' Champion Max Verstappen competes in sim racing in his free time, stating it helps him with real-life racing. During the COVID-19 pandemic, several racing series used sim racing games to host sanctioned events, such as Formula One's Virtual Grands Prix, the eNASCAR iRacing Pro Invitational Series, IndyCar iRacing Challenge, and 24 Hours of Le Mans Virtual.

Some racing games have introduced a multiplayer driver ranking system for organizing online racing, typically with two types of rankings: safety and speed. An Elo rating system is often used for driver speed, while a safety rating acts as a license for certain race classes. Sim racing games with ranked online racing include iRacing (with iRating and safety rating), Gran Turismo Sport (with Driver Class and Sportsmanship Points), Project CARS 2 (Racecraft Ranking and Skill Rating), RaceRoom (with Reputation Rating and Rating), and Assetto Corsa Competizione. Other games, like Automobilista 2 and rFactor 2, have similar systems under development.

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