Running from 1979 to 1989, Fabuland was a theme focused on larger dollhouse-styled builds with Fabuland Figures - unique figures that were larger than minifigures. The theme was extremely popular during its ten-year run, with references in The LEGO Movie.
A working title for the set's development was "LEGO Storytelling", a nod to Fabuland being the earliest example of a theme with an associated story. 40506 was designed by Markus Rollbühler, based on a concept model by Stuart Harris. An early concept for the set was an upscaled version of a Fabuland scooter element as well as a vacuum cleaner. Illustrations created by LEGO House associate Didiac Perez are featured in the set's instructions, paying tribute to the illustrations featured in original Fabuland instruction booklets. The set was unveiled to members of the LEGO Ambassador Network during Fan Media Days.
The set features large-scale, brick-built renditions of Fabuland characters Edward Elephant, Joe Crow, Lucy Lamb and Clive Crocodile.