Human Head Studios was founded in October 1997 by a group of six developers formerly from Raven Software: Ben Gokey, Chris Rhinehart, Paul MacArthur, Ted Halsted, James Sumwalt, and Shane Gurno—later joined by game producer Tim Gerritsen as co-owner in June 1998. Regarding the origin of the studio's name, Gerritsen explained: "When the guys were thinking of leaving Raven Software, someone posted a message via e-mail that they had lost some money. This started people saying they had lost all sorts of things. One person posted that they had misplaced a bag of human heads and this gave the inspiration for the name."

Their first game was Rune, a third-person Viking action game. The company also worked on the long-anticipated first-person shooter Prey, a game that was executive produced by 3D Realms.

On November 13, 2019, the studio announced its closure, immediately after the release of Rune II. The whole team subsequently formed a new studio, Roundhouse Studios, under ZeniMax Media. Chris Rhinehart of Human Head/Roundhouse stated that "Sadly, we had to wind down the business of Human Head Studios and close its doors", but had been able to reach out to ZeniMax to establish this new studio.

Roundhouse Studios was closed in May 2024 and its team was moved to ZeniMax Online Studios.