Sonic Mars

Sonic X-treme was a platform game in which players controlled Sonic the Hedgehog from a third-person perspective. It would have been the first Sonic the Hedgehog game to feature 3D gameplay, predating Sonic Adventure (1998). Gameplay was similar to the Sega Saturn platform game Bug! (1995), though producer Mike Wallis said that X-treme differed in that Sonic was free to roam levels, unconstrained by linear paths.

X-treme featured a fisheye camera system, the "Reflex Lens", that gave players a wide-angle view, making levels appear to move around Sonic. Levels would rotate around a fixed center of gravity, meaning Sonic could run up walls, arriving at what was previously the ceiling. Sonic was also able to enter and exit the screen as he moved. Boss battles were set in open, arena-style levels, and the bosses were rendered in polygons instead of sprites. These levels used shading, transparency, and lighting effects to showcase the Saturn's technical potential.

After Naka's return to Japan with his team in late 1994, STI was left with mostly American staff. Development of Sonic X-treme began in late 1994 at STI. Michael Kosaka was executive producer and team leader, and designer and CGI artist Senn created animations to pitch the game to Sega executives. As new consoles and the 32-bit era were on the way, the game was moved to the 32X under the working titles Sonic 32X and Sonic Mars after the "Project Mars" codename used for the 32X.

The initial 32X design was an isometric side-scroller, but became a full 3D game with a view set on a floating plane. Kosaka completed design documents before the 32X was released, without a clear picture of the hardware. Some of Kosaka's concepts were new dynamics to the gameplay, including the ability for a second player to play as a character other than Tails. Various playable characters, including some from the cartoon, would be unlocked as they were rescued and have unique moves.

In place of Sonic X-treme, Sega released a port of the Genesis game Sonic 3D Blast, and Sonic Jam, a compilation of Genesis Sonic games with an additional 3D level. Sonic X-treme's cancellation is cited as a key reason for the Saturn's failure. While Sega controlled up to 55% of the console market in 1994, by August 1997, Sony controlled 47%, Nintendo 40%, and Sega only 12%.

X-treme is regarded as the most famous canceled Sonic game, and journalists and fans have speculated about its potential. David Houghton of GamesRadar+ described the prospect of "a good 3D Sonic game" on the Saturn as a "What if..." scenario akin to dinosaurs surviving extinction. IGN's Travis Fahs described X-treme as "an empty vessel for Sega's ambitions and the hopes of their fans" and said it was an important change for Sega, its mascot and the Saturn.