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Nintendo continued to produce popular toys, including the Ultra Machine, Love Tester and the Kousenjuu series of light gun games.

Despite some successful products, Nintendo struggled to meet the fast development and manufacturing turnaround required in the toy market, and fell behind the well-established companies such as Bandai and Tomy.

In 1963, Yamauchi renamed Nintendo Playing Card Co. In 1966, Nintendo moved into the Japanese toy industry with the Ultra Hand, an extendable arm developed by its maintenance engineer Gunpei Yokoi in his free time.

Yokoi was moved from maintenance to the new "Nintendo Games" department as a product developer.

Following some success, Nintendo developed several more light gun machines (such as the light gun shooter game Wild Gunman) for the emerging arcade scene.

In 1985, a cosmetically reworked version of the system known outside Japan as the Nintendo Entertainment System or NES, launched in North America.

The practice of bundling the system along with select games helped to make Super Mario Bros. In 1988, Gunpei Yokoi and his team at Nintendo R&D1 conceived the new Game Boy handheld system, with the purpose of merging the two very successful ideas of the Game & Watch's portability along with the NES's cartridge interchangeability.

While the Laser Clay Shooting System ranges had to be shut down following excessive costs, Nintendo had found a new market.

Nintendo's first venture into the video gaming industry was securing rights to distribute the Magnavox Odyssey video game console in Japan in 1974.

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