Sunset Beach was created in 1996, in an attempt to rebuild the NBC Daytime lineup and target the younger audience. It was the first daytime soap opera produced by Aaron Spelling, the chief of Spelling Television (Spelling had also produced several primetime soap operas, and was the executive producer of the 1991 film Soapdish, a satirical look at daytime soap operas). Jonathan Levin, one of the show's consulting producers, commented on the change that a new soap opera brings to the lineup, and the tough process of a viewer getting to know a new soap: "It is very difficult to change the loyalty of the daytime viewer, and we’re talking about shows that have been on for 30 years. That's one of the reasons we’re targeting young viewers — they’re the most available and the most flexible in their viewing habits.".

In the process of making the show, Aaron Spelling liked the idea of naming it Never Say Goodbye, as suggested by Viacom chairman Sumner Redstone during a dinner with Spelling, but later tests proved that the viewers were more drawn to the title Sunset Beach. At first, the show was given a one-year deal, with 255 episodes to produce. The show was renewed again for another year, and then picked up in six-month intervals for its final year in 1999.