1986 saw many sequels and prequels in video games, such as Super Mario Bros.: The Lost Levels, along with new titles such as Arkanoid, Bubble Bobble, Castlevania, Dragon Quest, Ikari Warriors, The Legend of Zelda, Metroid, Out Run and R.B.I. Baseball. The year's highest-grossing arcade video games were Hang-On in Japan, Hang-On and Gauntlet in the United States, and Nemesis (Gradius) in London. The year's bestselling home system was the Family Computer and Nintendo Entertainment System for the third year in a row, while the year's best-selling home video games in Western markets were Super Mario Bros. in the United States and Yie Ar Kung-Fu in the United Kingdom.

Video game developer Masahiro Sakurai considers 1986 the most incredible year for the video game industry. He cited the release of several games that were the beginning of popular and long-lasting franchises such as The Legend of Zelda, Dragon Quest, Castlevania, and Kunio-kun. He attributed their release to new hardware like the Family Computer Disk System and megabit ROMs that afforded developers with greater memory storage, which allowed for more creative possibilities. Sakurai noted that the better games in the competitive market generated more appeal.

Financial performance In the United States, the home video game industry recovered with the arrival of the third generation of video game consoles led by the Nintendo Entertainment System (NES).

Highest-grossing arcade games

Japan In Japan, the following titles were the highest-grossing arcade games of 1986, according to the Game Machine charts.

Rank Title Arcade cabinet Points January–June July–December Total 1 Hang-On Ride-on / sit-down 2 Major League Table 968 1678 3 Ikari (Ikari Warriors) Table 992 1420 4 Real Mahjong Haihai Table 1062 1083 5 Tehkan World Cup Table 694 1152 6 Space Harrier Rolling type 887 949 7 Gradius Table 860 965 8 Arkanoid Table 1719 1719 9 ASO: Armored Scrum Object Table 898 820 10 1942 Table 862 826

United Kingdom and United States In the United Kingdom and United States, the following titles were the highest-grossing arcade video games of 1986.

Rank United Kingdom United States Electrocoin (London) RePlay AMOA Play Meter Dedicated Conversion 1 Nemesis (Gradius) Hang-On Gauntlet Mat Mania Gauntlet 2 Hang-On Gauntlet Hang-On, Ikari Warriors, Speed Buggy, World Series Choplifter, Hogan's Alley, 1942, Rush'n Attack rowspan="9" 3 Ikari Warriors Mat Mania 4 Arkanoid World Series 5 Super Sprint Spy Hunter 6 Salamander Pole Position II rowspan="5" rowspan="5" 7 Rampage Mania Challenge 8 Enduro Racer Ikari Warriors 9 Konami GT (GT Racer) Ghosts 'n Goblins 10 Jail Break Super Sprint

Best-selling home systems Rank System(s) ManufacturerType Generation SalesJapanUSAWorldwide1Family Computer / Nintendo Entertainment SystemNintendoConsole8-bit3,900,0003,000,0006,900,000+2Commodore 64 (C64)CommodoreComputer8-bit 2,500,0003Family Computer Disk SystemNintendoConsole8-bit2,000,000 2,000,0004Commodore 128 (C128)CommodoreComputer8-bit 1,000,0005Apple IIApple Inc.Computer8-bit 700,0006NEC PC-88 / PC-98NECComputer8-bit / 16-bit,000 ,000+7Sega SG-1000 / Master SystemSegaConsole8-bit280,000125,000405,000+8MacApple Inc.Computer16-bit 380,0009AmigaCommodoreComputer16-bit 200,000Atari STAtari CorporationComputer16-bit 200,000

Best-selling home video games Japan In Japan, home video games that sold at least one million copies in 1986 include The Hyrule Fantasy: Zelda no Densetsu (The Legend of Zelda), which sold copies for the Family Computer Disk System (FDS) on its first day of release in February; Dragon Quest, which sold over cartridges for the Famicom (Nintendo Entertainment System) within six months between May and November; and Gradius, which sold over between April and December.

According to Famicom Tsūshin (Famitsu) magazine, the following titles were the top ten best-selling 1985-1986 releases during the three-year sales tracking period between May 1986 (when Famitsu began tracking sales) and mid-1989.

Rank Title Developer Publisher Genre Platform Sales 1 Pro Yakyū: Family Stadium (R.B.I. Baseball) Namco Namco Sports (baseball) Family Computer < 2,050,000 2Super Mario Bros. Nintendo Nintendo Platformer Family Computer 3 Super Mario Bros. 2 (The Lost Levels) Nintendo Nintendo Platformer Family Computer Disk System < 1,380,000 4 Ganbare Goemon! Karakuri Dōchū Konami Konami Action-adventure Family Computer < 1,200,000 5 Takahashi Meijin no Bōken Jima (Adventure Island) Hudson Soft Hudson Soft Platformer Family Computer < 1,050,000 6Gegege no Kitaro: Youkai Daimakyou (Ninja Kid) TOSE Bandai Action Family Computer rowspan="2" 7 Makaimura (Ghosts 'n Goblins) Capcom Capcom Platformer 8 Dragon Quest (Dragon Warrior)Chunsoft Enix Role-playing Family Computer 1,000,000+ 9 Dragon Ball: Shenlong no Nazo (Dragon Power) TOSE Bandai Action Family Computer rowspan="2" 10 MetroidNintendo Action-adventure Family Computer Disk System

The following titles were the best-selling home video games on the bi-weekly Famitsu charts in 1986. Famicom Tsūshin magazine began tracking sales from May 1986.

Month Weeks 1-2 Weeks 3-4 Gegege no Kitaro: Youkai Daimakyou (Famicom) Super Mario Bros. (Famicom) Super Mario Bros. 2 (FDS) Makaimura (Famicom) Volleyball (FDS) Ganbare Goemon! Karakuri Dōchū (Famicom) Ganbare Goemon! Karakuri Dōchū (Famicom) Takahashi Meijin no Bōken Jima (Famicom) Akumajō Dracula (FDS) Takahashi Meijin no Bōken Jima (Famicom) Pro Wrestling - Famicom Wrestling Association (FDS) Dragon Ball: Shenlong no Nazo (Famicom) Meikyū Kumikyoku (Famicom)

United Kingdom In the United Kingdom, the following titles were the top ten best-selling home video games of 1986, according to the annual Gallup software sales chart. The top ten titles were all home computer games. The best-selling game was Yie Ar Kung-Fu, making it the second year in a row that a fighting game topped the annual charts, after The Way of the Exploding Fist in 1985.

Rank Title Developer Publisher Genre 1 Yie Ar Kung-Fu Konami Imagine Software Fighting 2 Formula 1 Simulator Spirit Software Mastertronic Racing 3 Commando Capcom Elite Systems Run-and-gun shooter 4 Green Beret Konami Imagine Software 5 Thrust Superior SoftwareSuperior Software Multi-directional shooter 6 Ghosts 'n Goblins Capcom Elite Systems Platformer 7 Paperboy Atari Games Elite Systems Action 8 Rambo Ocean SoftwareOcean Software Run-and-gun shooter 9 Kik Start MastertronicMastertronic Racing 10 Ninja Master Tron Software Firebird Software Action

United States In the United States, Super Mario Bros. for the Nintendo Entertainment System (NES) was the best-selling home video game of 1986. The following titles were the best-selling home video games on the bi-weekly FAO Schwarz charts in 1986, reported by Famicom Tsūshin (Famitsu) magazine from June 1986 onwards.

Month Weeks 1-2 Weeks 3-4Platform Sales Super Mario Bros. Nintendo Entertainment System Kung Fu Nintendo Entertainment System Super Mario Bros.Nintendo Entertainment System rowspan="2" Kung Fu rowspan="3" rowspan="3" 1986 Super Mario Bros. Nintendo Entertainment System 1,000,000+

Top-rated games Major awards Award Amusement Players Association Awards (United States, January 1987) Famitsu Best Hit Game Awards (Japan, February 1987) 5th Golden Joystick Awards (United Kingdom, March 1987)ArcadeConsoleComputer Game of the Year Super Mario Bros. Dragon Quest (Family Computer) Gauntlet Critics' Choice Awards Meikyuu Kumikyoku (Famicom) Nazo no Kabe (Famicom) Volleyball (Famicom) Zanac (Famicom Disk System) Best Scenario / Story Dragon Quest (Yuji Horii) Best Graphics / Visuals Out Run Akumajō Dracula (Castlevania) Best Music / Soundtrack The Hyrule Fantasy: Zelda no Densetsu (Koji Kondo) Sanxion Best Audio Gauntlet Best Character Design Dragon Quest (Akira Toriyama) Best Port Ghosts 'n Goblins (Famicom) Original / Innovative Gauntlet The Sentinel Best Hardware Family Trainer (Power Pad) Best Software House Elite Systems Best Programmer Koichi Nakamura (Dragon Quest) Andrew Braybrook Best Arcade-Style Game Uridium Best Action Game Metroid (Famicom) Best Platform Game Super Mario Bros. 2 (Famicom Disk System) Best Shooting Game Gradius (Famicom) Best Adventure Game The Pawn Best RPG Dragon Quest (Famicom) Best Sports Game Pro Yakyū: Family Stadium (R.B.I. Baseball) Best Puzzle Game Kineko (Famicom Disk System) Best Strategy Game Vietnam

Famitsu Platinum Hall of Fame The following 1987 video game release entered Famitsu magazine's "Platinum Hall of Fame" for receiving a Famitsu score of at least 35 out of 40.

Title Platform Score (out of 40) Developer Publisher Genre Pro Yakyū: Family Stadium (R.B.I. Baseball) Family Computer 35 Namco Namco Baseball

Business New companies: Majesco, Ubi Soft, Bethesda Softworks, Famitsu, FromSoftware Defunct: Imagic. June 13 – Activision merges with Infocom. Activision acquires Gamestar Software. Sinclair Research Ltd. is acquired by Amstrad.

Notable releases Arcade February – Namco releases Sky Kid Deluxe, their first game to use a Yamaha YM2151 FM sound chip. February – SNK releases Ikari Warriors, which shares many elements with Taito's Front Line from 1982, but adds two-player simultaneous play and visuals closer to 1985's Commando. It is SNK's breakthrough game in the US. April – Sega releases Wonder Boy, the first in the series. July 8 – Namco releases The Return of Ishtar, which is the sequel to The Tower of Druaga. July – Ten years after Atari's Breakout, Taito releases Arkanoid, which adds power-ups and unique levels and generally reinvigorates the concept. August 4 – Taito releases Bubble Bobble. September 20 – Sega releases the Out Run racing game. October 1 – Namco releases Genpei Tōma Den. December – Namco releases Rolling Thunder, distributed outside Japan by Atari Games.

Console February 21 – Nintendo releases The Legend of Zelda (designed by Shigeru Miyamoto for the Family Computer Disk System), the first game in The Legend of Zelda series. May 27 – Enix releases Dragon Quest for the Famicom, which is usually considered the foremost Japanese role-playing video game, and is the first game in a series that has been phenomenally successful in Japan. June 3 – Nintendo releases Super Mario Bros.: The Lost Levels as the sequel to the Super Mario Bros.. The game was not released in North America, partially because it was deemed too difficult. August 6 – Nintendo releases Metroid by Makoto Kano, the first in the Metroid series. September 12 – Hudson Soft releases Adventure Island. September 26 – Konami releases Akumajō Dracula for the Famicom Disk System, the first game in the Castlevania series. November 1 – Sega releases Alex Kidd in Miracle World. It is the first game in the Alex Kidd series created for this character, and the most popular of all Alex Kidd games. December 10 – Namco releases Pro Baseball: Family Stadium for the Famicom, the first in the Famista series. December 19 – Nintendo releases Kid Icarus.

Computer January 1 – Commodore releases Mind Walker for the Amiga. It keeps running, unmodified, on all versions of the Amiga hardware and OS. May 6 – Infocom releases the highly regarded Trinity. July 8 – Llamasoft's founder Jeff Minter releases Iridis Alpha, a shoot 'em up game for the Commodore 64 computer August 15 – Electronic Arts releases open-ended space exploration adventure game Starflight, which goes on to sell a million copies. October – Sierra On-Line expands their "Quest" line with King's Quest III: To Heir Is Human and Space Quest I: The Sarien Encounter. New World Computing releases Might and Magic Book One: The Secret of the Inner Sanctum for the Apple II, the first installment in the Might and Magic series. Activision releases Labyrinth: The Computer Game. Developed by Lucasfilm Games, this is the first of the LucasArts adventure games.