United Plankton Pictures

Some evidence shows that the idea for SpongeBob SquarePants dates back to 1986, during Hillenburg's time at the Orange County Marine Institute. He indicated that children's television series such as The New Adventures of Mighty Mouse (1987–1988) and Pee-wee's Playhouse (1986–1991) "sparked something in [him]." He continued, "I don't know if this is true for everybody else, but it always seems like, for me, I'll start thinking about something and it takes about ten years to actually have it happen, or have someone else believe in it... It took me a few years to get [SpongeBob SquarePants] together."

During the production of Rocko's Modern Life, Martin Olson, one of the writers, read The Intertidal Zone and encouraged Hillenburg to create a television series with a similar concept. At that point, he had not even considered creating his own series: "After watching Joe [Murray] tear his hair out a lot, dealing with all the problems that came up, I thought I would never want to produce a show of my own." However, he realized that if he ever did, this would be the best approach: "For all those years it seemed like I was doing these two totally separate things. I wondered what it all meant. I didn't see a synthesis. It was great when [my two interests] all came together in [a show]. I felt relieved that I hadn't wasted a lot of time doing something that I then abandoned to do something else. It has been pretty rewarding.", Hillenburg said in 2002. He said that he finally decided to create a series as he was driving to the beach on the Santa Monica Freeway one day.

As he was developing the show's concept, Hillenburg remembered his teaching experience at the Orange County Marine Institute and how mesmerized children were by tide-pool animals, including crabs, octopuses, starfish, Cyclops copepod and sponges. It came to him that the series should take place underwater, with a focus on those creatures: "I wanted to create a small town underwater where the characters were more like us than like fish. They have fire. They take walks. They drive. They have pets and holidays." It suited what Hillenburg liked for a show, "something that was fantastic but believable." He also wanted his series to stand out from most popular cartoons of the time exemplified by buddy comedies such as The Ren & Stimpy Show (1991–1995). As a result, he decided to focus on one main character: the weirdest sea creature that he could think of. This led him to the sponge: "I wanted to do a show about a character that was an innocent, and so I focused on a sea sponge because it's a funny animal, a strange one." In 1994, Hillenburg began to further develop some characters from The Intertidal Zone, including Bob the Sponge, who resembles a realistic sea sponge; at first, Hillenburg continued this design because it "was the correct thing to do biologically as a marine-science teacher". In determining the new character's personality, he drew inspiration from innocent, childlike figures that he enjoyed, such as Charlie Chaplin, Laurel and Hardy, Jerry Lewis, Pee-wee Herman, Abbott and Costello, and The Three Stooges. While Hillenburg "retained the idea of a living sea sponge", he soon considered giving the character a square shape (like a kitchen sponge), and realized that this idea would match the character's square personality perfectly: "[I]t looked so funny. I think as far as cartoon language goes he was easier to recognize. He seemed to fit the character type I was looking for—a somewhat nerdy, squeaky clean oddball." To voice the central character of the series, Hillenburg turned to Tom Kenny, whose career in animation had begun with his role in Rocko's Modern Life. Elements of Kenny's own personality were employed in further developing the character.

While pitching the cartoon to executives at Nickelodeon, Hillenburg donned a Hawaiian shirt, brought along an "underwater terrarium with models of the characters", and played Hawaiian music to set the theme. Nickelodeon executive Eric Coleman described the setup as "pretty amazing". Although Derek Drymon, creative director of SpongeBob SquarePants, described the pitch as stressful, he said it went "very well". Nickelodeon approved and gave Hillenburg money to produce the show.