The game was in development while the developer attempted to get/license the rights to the series from EA, who published the previous games, so they could complete it independently. However, EA officially rejected the project in 2023, refusing both to fund the game and to license the IP, stating that "Alice" is an important part of EA's overall game catalog. The project is now cancelled with no possibility of continuation.

Alice: Asylum takes place before the events of American McGee's Alice (2000) when Wonderland is still pristine and not yet corrupted. The game follows 13-year-old Alice as she grapples with trauma from a fire that killed her family. Inspired by the "Stages of Grief," the narrative explores Alice's psychological journey through different "Realms" representing her mental states: the Denial Realm (depicted as a twisted circus), and other realms tied to her trauma and fractured memories. Alice encounters familiar characters like the Caterpillar, Mock Turtle, and the White Rabbit, who serve as guides or obstacles in her mind. The core conflict revolves around Alice's struggle with her "Shadow Self"—a dark manifestation of her guilt and rage—while uncovering the truth about the fire and her family's death. The game was designed as a psychological horror action-adventure focusing on trauma, grief, and self-acceptance.