The game takes place on a drivable recreation of the Hawaiian island of Oahu, modeled from satellite imagery and covering over 1,000 miles (1,600 kilometers) of roads and highways. The terrain encompasses rain forests, mountain roads, sandy beaches, and the urban environment of Honolulu. Players can drive freely on-road and off-road across this environment, and the map includes small outlying islands accessible beyond the main landmass.
The game features more than 125 licensed sports cars and motorcycles. Players begin by purchasing a car and a house, then explore the island progressively, unlocking key locations as they travel. The game's budget during development, which began around 2003, was estimated between $15 million and $25 million.
The multiplayer component was branded as M.O.O.R. — Massively Open Online Racing — and represented the game's defining feature. Rather than operating as a separate mode, the online layer was built on top of the single-player experience: every activity available offline was also available with other real players present in the same world simultaneously. Players could spontaneously challenge one another anywhere on the map.
Additional features enabled by the online infrastructure included an ETrade system for buying and selling cars between players, a Drive-In system where players could create and publish their own time-trial challenges with an entry fee for competitors, a live island map displaying other players' positions and sessions, in-game news notifications, and a clan system with intra- and inter-clan matchmaking. Online services for Test Drive Unlimited were shut down on 29 September 2012.
The Xbox 360 version supported steering wheel controllers from launch and added force feedback wheel support in a subsequent free update. Eden Games was granted access to unique Xbox Live features to deliver what it described as a seamless online experience on that platform.
The PlayStation 2 version included a distinctive feature in which 30 of the most active participants in Atari's closed beta — chosen from a pool of 1,500 testers — were immortalized as named non-player characters within the game. These testers were allowed to assign their own names or screen names to their NPC counterparts, who were placed in prominent positions within the game's motoring clubs.
Test Drive Unlimited received generally favorable reviews according to Metacritic. 411Mania gave the Xbox 360 version 8.6 out of 10, describing it as a title with "open-ended" gameplay that "never actually ends" and comparing the sense of ownership over homes and vehicles to the social dynamics of World of Warcraft. The Sydney Morning Herald awarded four stars out of five and called it "a car aficionado's paradise and a novel concept in driving games." The Times also gave it four stars, stating it "comes closer than most games to re-creating the freedom of real life." In Japan, where Microsoft published the Xbox 360 version on 26 April 2007, Famitsu awarded it 34 out of 40. The Academy of Interactive Arts and Sciences nominated the game for Racing Game of the Year at the 10th Annual Interactive Achievement Awards.
Test Drive Unlimited introduced the concept of a massively open online racing world to the mainstream market several years before similar concepts became more common. It was followed by a sequel, Test Drive Unlimited 2, in 2011, which expanded the concept to two islands — Oahu and Ibiza — while adding off-road vehicle categories and a narrative framework around a fictional racing championship called the Solar Crown.
A third game and soft reboot, Test Drive Unlimited Solar Crown, was developed by Kylotonn under the name KT Racing and published by Nacon. Set on Hong Kong Island with Ibiza added in a later seasonal update, it was released on 12 September 2024.