Before Rare was acquired by Microsoft, Banjo-Pilot was being developed as 'Diddy Kong Pilot', a sequel to 'Diddy Kong Racing'. After the acquisition, the game was changed to feature Banjo-Kazooie characters because Nintendo still owned the rights to Donkey Kong characters.
The game was originally going to run on the voxel engine, however when problems arose when having more than 2 characters on-screen as well as the inclusion of more characters and weapons, the developers decided to use Mode 7 graphics instead. Also, a tilt pack was originally to come with the game, however the feature was removed due to problems when trying to view the screen.
In a prototype build shown at Spaceworld, when it was still being developed as Diddy Kong Pilot, a number of Mario characters were shown to be playable at one point in the game. The characters were Mario, Peach, Yoshi, Wario, Bowser and Toad.
A new character named Redneck Kong was to be a racer in the original Diddy Kong Pilot, however he was later intended to be replaced with Candy Kong.