The co-creators and producers of Avatar: The Last Airbender, Michael Dante DiMartino and Bryan Konietzko, met at a Halloween party in 1995 during their time as students in the Rhode Island School of Design, and began their professional partnership later that year when Konietzko assisted DiMartino in painting backgrounds and cels for the latter's student film. DiMartino and Konietzko moved to Los Angeles in 1996 and 1998 respectively to pursue careers in the animation industry. In between jobs, DiMartino animated a short titled Atomic Love that he pitched as a TV series, but was unsuccessful due to the amount of robot-based animated series already in development. During Konietzko's stint as art director on Invader Zim, he and DiMartino formulated the idea of pitching a coming-to-age series based on their childhoods, but were too busy with their respective jobs to solidify the concept. When Invader Zim was abruptly canceled in January 2002, Konietzko declared to DiMartino his resolution to get their idea made at all cost.[17]

By this time, Konietzko had established a good relationship with Nickelodeon head of development Eric Coleman, who was interested in the prospect of Konietzko creating and pitching his own show. Upon the end of his job on Invader Zim, Konietzko met with Coleman, introduced him to DiMartino and discussed their intent to create a series that held heart and integrity while meeting the network's commercial requirements. Although their meeting went well, Coleman revealed that the network was not looking for coming-of-age stories based on human characters. He added that the network was following the success of the Lord of the Rings and Harry Potter film series and was thus searching for non-violent action and adventure concepts with an emphasis on legends and lore. Lastly, he established that the show would require the point-of-view of either a kid hero or a non-human character, emphasizing that middle-aged human main characters would be off-brand for Nickelodeon. Konietzko concluded the meeting with the promise of a pitch along those directives within a month.

DiMartino and Konietzko indiscriminately laid out their conceptual sketches in their effort to establish a new idea. Among them was a sketch that Konietzko created during his time on Invader Zim, which featured a robot cyclops monkey with an arrow on his head and holding a staff, a balding middle-aged man in a futuristic outfit, and a bipedal polar bear-dog hybrid. Konietzko cited Cowboy Bebop as the sketch's primary influence, describing the sketch as a "half-baked" attempt at a similar science fiction adventure concept. Recalling Coleman's advice against middle-aged main characters, Konietzko redrew the human character as a boy, but retained his baldness and transferred the robot's staff and arrows to him. After adding the new drawing to the collection of sketches, Konietzko began drawing other fanciful animal hybrids, which culminated in a drawing of a good-natured and nomadic "Huck Finnesque" boy herding a group of flying bison-manatee hybrids. The sketch was influenced by the works of Hayao Miyazaki, of whom Konietzko and DiMartino were fans.

DiMartino drew inspiration for what would become the Southern Water Tribe from a documentary on the Imperial Trans-Antarctic Expedition, and he pitched Konietzko the idea of a group of people similarly trapped in the South Pole. Two weeks after their meeting with Coleman, Konietzko was suddenly inspired by DiMartino's idea and formulated a concept of a group of kids in the South Pole who were terrorized by "fire people" and rescued by the young nomad from his earlier drawing. Konietzko and DiMartino reconvened that evening and began creating the series' setting over the next two weeks. Although DiMartino and Konietzko were themselves fans of the two successful British fantasy series that Nickelodeon sought to emulate, the pair chose to differentiate their own series by inserting influences from Asian cultures and philosophies, traditional martial arts, yoga, anime, and Hong Kong cinema.The co-creators successfully pitched the concept to Coleman with early sketches of Aang, Katara, and Sokka, three color images depicting the desired action, adventure, and magic aspects, and a description of the series' characters, setting and full story arc.The series was introduced to the public in a teaser reel at Comic-Con 2004, and premiered on February 21, 2005.]

According to head writer Aaron Ehasz, Konietzko and DiMartino originally envisioned the series as three seasons long. However, Nickelodeon asked Ehasz about his ideas for a potential fourth season, which he later discussed with both Konietzko and DiMartino. Ehasz believed that a fourth season would be created, but this plan was interrupted when Konietzko and DiMartino decided to focus on assisting M. Night Shyamalan as executive producers for The Last Airbender film. Ehasz claims that Shyamalan insisted they create a fourth season, but Konietzko and DiMartino wanted to work on the live-action film and reverted to the original three-season plan. Konietzko and DiMartino have denied Ehasz's statements, asserting that a fourth season was never considered by them or Nickelodeon. Shyamalan has made comments that align with Ehasz's, such as acknowledging uncertainty at the time about whether the series would conclude after three seasons. He also mentioned that while he was supportive of the co-creators continuing the animated series beyond three seasons, he refused to sign on for the live-action adaptation if that happened because he wanted to direct a trilogy.

A pilot episode for the series was made in 2003. It was animated by Tin House, Inc., written by Michael Dante DiMartino and Bryan Konietzko, and directed by Dave Filoni. Mitchel Musso voiced Aang in this pilot but was later replaced by Zach Tyler Eisen when the show began production. In the episode, Sokka and his sister Kya (renamed to Katara by the time the series aired) must travel the world to find masters for Aang, who is the Avatar; however, they must evade a critical foe, Prince Zuko of the Fire Nation, who wants to capture Aang.