In 1971, Bushnell and colleague Ted Dabney formed Syzygy with the intention of producing a Spacewar clone known as Computer Space. The “counter slip” state machine technology which drove Computer Space was later patented and served as the core technology for all arcade video games until 1975 when microprocessors appeared on the scene and soon became the technology of choice.
In order to keep the company alive while the machine was being prototyped, the two took on a route servicing broken pinball machines. Dabney built the prototype and Bushnell shopped it around, looking for a manufacturer. They made an agreement with Nutting Associates, a maker of coin-op trivia and shooting games, who produced a fiberglass cabinet for the unit that included a coin-slot mechanism.  
Computer Space was a commercial failure, though sales exceeded $3 million. Bushnell felt that Nutting Associates had not marketed the game well, and decided that his next game would be licensed to a bigger manufacturer.
In 1972, Bushnell and Dabney set off on their own, and learned that the name "Syzygy" was in use; Bushnell has said at different times that it was in use by a candle company owned by a Mendocino hippie commune     and by a roofing company. They instead incorporated under the name Atari, a reference to a check-like position in the game Go (which Bushnell has called his "favorite game of all time"). They rented their first office on Scott Boulevard in Sunnyvale, California, contracted with Bally Manufacturing to create a driving game, and hired their first employee, engineer Allan Alcorn. Bushnell later bought out Dabney, who was worried about the success of the video game market; Dabney took over the pinball servicing route instead.
After Bushnell attended a Burlingame, California demonstration of the Magnavox Odyssey, he gave the task of making the Magnavox tennis game into a coin-op version to Alcorn as a test project. Alcorn incorporated many of his own improvements into the game design, such as scoring and sound, and Pong was born. Pong proved to be very popular; Atari released a large number of Pong-based arcade games over the next few years as the mainstay of the company.
In 1974, Atari entered the consumer electronics market after engineers Harold Lee and Bob Brown approached Alcorn with an idea to develop a home version of Pong. With a marketing and distribution agreement with Sears, Pong sales soared when the unit was released in 1975.
Using borrowed parts from Atari, having the main PCB printed up by Atari employee Howard Cantin, and receiving further assistance from Atari employee Ron Wayne, two non-employees, Steve Jobs and Steve Wozniak - both of whom had previously been involved in the development of the Atari arcade game Breakout - created and marketed their own home computer. They offered the design to Bushnell, but Atari had no desire to build computers at the time, instead focusing on the arcade and home console markets.
By 1976 Atari was in the midst of developing the Atari VCS (Video Computer System, later renamed the Atari 2600), but Bushnell realized that if the company was going to grow, it needed capital, and with the stock market in a bleak condition, going public would not be the solution. He made a list of companies to approach to buy Atari. Meanwhile, Steve Ross, CEO of Warner Communications, noticed that his children were hovering around video game cabinets at Walt Disney World. Warner Communications contacted Atari to discuss purchasing the company. For $28 million, Warner Communications (now Time Warner) bought Atari, bringing the capital they needed for the VCS launch, which took place in August 1977.
In November 1978, Bushnell was forced out of the company after a dispute with Warner over its future direction, notably on the lifespan of the Atari 2600 and their closed software strategy, which was later changed for the new home computer division.
By 1982, Atari had US$2 billion in annual sales and was the fastest-growing company in the history of American business. By 1984, the company had crashed and was split into three pieces to be sold off. The coin-op division became Atari Games. The Consumer division was sold to Jack Tramiel, who folded it into his Tramel Technology, Ltd., which was then renamed Atari Corporation. The budding Ataritel division was sold to Mitsubishi Electric.
In 1977, while at Atari, Bushnell purchased Pizza Time Theatre from Warner Communications. It had been created by Bushnell, originally as a place where kids could go and eat pizza and play video games, which would therefore function as a distribution channel for Atari games. The Pizza Time Theatre / Chuck E. Cheese's also had animatronic animals that played music as entertainment. (Bushnell had always wanted to work for Walt Disney, but was continually turned down for employment when he was first starting out after graduation; Chuck E. Cheese's was his homage to Disney and the technology developed there.) In 1981 Bushnell turned over day-to-day food operations of Chuck E. Cheese’s to a newly hired restaurant executive and focused on Catalyst Technologies.
Through 1981 and 1982, Bushnell concentrated on subsidiaries Sente Technologies and Kadabrascope. Sente was a reentry into the coin operated game business and Kadabrascope was an early attempt at computer assisted animation. In 1983 as the restaurants started to lose money. Sente, though profitable, was sold to Bally for $3.9 million and Kadabrascope was sold to Lucas which became the beginnings of what became Pixar.
During this time Bushnell was using large loans on his Pizza Time Stock to fund Catalyst. Bushnell also became more and more involved in sailing and campaigned "Charlie" to the first to finish trophy in the Transpac Yacht race from Newport to Honolulu
By the end of 1983, Chuck E. Cheese was having serious financial problems. President and long-time friend Joe Keenan resigned that fall. Nolan tried to step back in, blaming the money problems on over-expansion, too much tweaking of the formula and saturation in local markets by the management team. He resigned in February 1984, when the Board of Directors rejected his proposed changes. Chuck E. Cheese's Pizza Time Theaters (now named after its famous mouse mascot) entered bankruptcy in the fall of 1984.
ShowBiz Pizza, a competing Pizza/Arcade family restaurant, then purchased Chuck E. Cheese's Pizza Time Theatre and assumed its debt. The newly formed company, ShowBiz Pizza Time, operated restaurants under both brands for a period of time before unifying all locations under the Chuck E. Cheese's brand. Today over 500 locations of this restaurant are in business.
Axlon launched many consumer and consumer electronic products successfully, most notably AG Bear, a bear that mumbled/echoed a child's words back to him/her. In the late 1980s, Axlon managed the development of two new games for the Atari 2600, most likely as part of a marketing attempt to revive sales of the system, already more than a decade old. The company was largely sold to Hasbro.
Etak, founded in 1984, was the first company to digitize the maps of the world, as part of the first commercial automotive navigation system; the maps ultimately provided the backbone for Google maps, mapquest.com, and other navigation systems; it was sold to Rupert Murdoch in the 1980s. In May 2000 the company, headquartered in Menlo Park, California, became a wholly owned subsidiary of Tele Atlas.
In the mid '90s Nolan Bushnell became senior consultant to the small game developer Play Net after it was bought under the name Arista. Play Net developed a touchscreen interface bar-top/arcade system that would also provide internet access, phone calls, and online networked tournaments. The company died shortly before the dot com bubble burst with its prototype machines still in development in 1997.
Bushnell's most recent company is uWink, which has gone through several failed iterations including a touch-screen kiosk designer and an online Entertainment Systems network. After nearly 7 years and over $24 million in investor funding, the latest version (announced in 2005) is a new interactive entertainment restaurant called the uWink Media Bistro, whose concept builds off his Chuck E. Cheese venture and previous 1988–1989 venture Bots Inc., which developed similar systems of customer-side point-of-sale touch-screen terminals in addition to autonomous pizza-delivery robots for Little Caesar's Pizza. Guests order their food and drinks using screens at each table, on which they may also play games with each other and watch movie trailers and short videos. The first Bistro opened in Woodland Hills, California on October 16, 2006. A second in Hollywood was established, and in 2008 the company opened a third Southern California restaurant and one in Mountain View, California, in Silicon Valley  (which has since shut down, mere months after opening).
On April 19, 2010 Atari announced Nolan Bushnell along with Tim Virden would join the company's Board of Directors.