Earthworm Jim PSP was first announced at E3 2006 by Atari, which had obtained the rights to produce an Earthworm Jim game for a handheld console, and a deal with Sony had been made. Atari announced that Earthworm Jim PSP would be a 2D sidescrolling platformer with elements of a run and gun, similar to the first two games, but now with 3D computer graphics. It would feature characters seen earlier in the franchise, including Queen Slug-for-a-Butt as an enemy, Peter Puppy as an ally, and Princess What's-Her-Name as a love interest for Jim. Billy the Bin would also make a reappearance as one of the bosses. By August 2006, Earthworm Jim PSP was reportedly at 80% complete, and more complete gameplay was shown in Las Vegas. Many video game journalists had hands-on playable builds of the game, such as GameSpot, GamesRadar, and IGN. Earthworm Jim PSP was initially scheduled for a late 2006 release, but this was pushed back to early 2007. When the time came around, the release was extended again to mid-year 2007. This caused concern for expectant fans, since the game had already been delayed once already. In response to this fan concern, Andrew Yoon of PSP Fanboy contacted Alissa Bell from Atari, who confirmed the game had been shelved, commenting: "I believe EWJ PSP is off the roster. May be revisited in the future, but the title is, as I hear it, on hold." Fans were generally excited about the Earthworm Jim revival, which makes it surprising why Atari would stall the project. The complicated transfer of Shiny Entertainment from Interplay to Foundation 9, and merging with The Collective to form Double Helix, may have been a contributing factor in the decision to cancel the game. According to Dave Perry, it was due to both Atari and Interplay's financial difficulties, and a row over royalties between Shiny, Interplay, and Atari.
