In October 1985, Sega released the SG-1000 Mark III, the newest version of the SG-1000 series with improved video hardware, more RAM and built-in card reader. A redesign of the Mark III came to the US (1986), Europe (1987) and Brazil (1989) under the name Master System.

The Master System was fairly successful in Europe and Brazil, where new games were produced until the mid-90s. In Japan and North America Sega's 8-bit console didn't stand a chance against Nintendo's NES.

SG-1000 card games are compatible with the Master System I. The Master System II model from 1990 no longer had a card reader.