LeoVegas will hold an 85% stake in the company, which will develop and offer games for LeoVegas brands as well as other gaming operators.
The studio aims to produce at least 20 games in the next two years, the first of which are expected to be released by the end of 2021.
LeoVegas CEO Gustaf Hagman said: “For a long time we have created exclusive games with the help of external providers, but now the time is right to take the step to do game development entirely on our own.
“Drawing from our data and casino knowledge we will be able to drive innovation and create games that our customers truly enjoy. In addition, we will create games and unique characters that can be used in our marketing, which will build stronger loyalty to our brands.”