In the late '80s, Interplay came out from under EA's wing and began publishing for itself; soon after, it started to publish for other developers. Then in 1997, Interplay released a pseudo-sequel to its 1988 post-apocalyptic RPG Wasteland; since EA retained the rights to Wasteland, the follow-up was set in an alternate world and renamed "Fallout". Fallout proved such an enormous success for Interplay – so great was its effect that it spurred a whole new generation of computer RPGs, just as it seemed the genre had petered out – that Interplay chose to spin off the internal division – led by Feargus Urquhart – responsible for the game.

The resulting studio, Black Isle, became soon renowned as the leading force in computer RPG design – both internally and as a host for the young BioWare. The two studios began to build on each other's achievements: Baldur's Gate essentially infused Fallout with the 2nd Edition AD&D rule set, while Planescape: Torment – often cited alongside Fallout as one of the best computer games of all time – built on the Baldur's Gate rules and technology, to produce a sort of anti-RPG.

Through the early 2000s, Black Isle chugged along, putting out about one game a year to the Fallout/Baldur template, most of which garnered huge praise and somewhat diminishing sales. Then in December of 2003, in the midst of Interplay's financial woes and a long and ugly divorce with BioWare, Interplay abruptly laid off the studio's entire staff; to date, no official explanation has been made. A number of ex-Islers started up a new studio called Obsidian, to resume their relationship with their old chums at BioWare.