Dave Arneson, who has died aged 61, was an American pioneer of role playing games and co-creator of the immersive world of Dungeons & Dragons; its extraordinary popularity spawned a host of imitators both on paper and online, transforming a geeky concept once considered the exclusive realm of spotty teenage boys into an industry worth billions that now captivates tens of millions of people around the world.

With Gary Gygax (who died last year), his partner in creating D&D in the early 1970s, Arneson developed rules that expanded on traditional tabletop battles played out using lead figurines, making two principal innovations. Firstly, instead of using historically-themed armies often thousands strong, the pair concentrated on smaller groups and individuals drawn from the medieval and fantasy worlds popularised by JRR Tolkien. The biggest departure, however, was to focus on what their imaginary protagonists did "in between" the fighting.

"We started setting different objectives for the players. We started stealing things: bombs, guns, food supplies, that sort of thing," Arneson recalled, describing the evolution of D&D. "Players could negotiate with each other for who captured the goal, and then had to figure out how they were going to slip the products past a blockade and sell them on the black market."

Suddenly, the heroes of role-playing games (or RPGs as they quickly became known) were not Napoleonic-era officers, but axe-wielding dwarves and warrior-princesses clad in unfeasibly tight leather armour. They faced not artillery or cavalry charges, but goblins and dragons, which could only be defeated by the acquisition of "skills" and "experience" picked up in the course of the game.

At the time that he was developing D&D's rules, Arneson was working as a security guard and "couldn't afford new shoes". Then a friend bankrolled the pair to produce 500 copies of the first D&D rule books from Gygax's basement. With its dependence on players' imaginations and quirky innovations (six sided dice were supplemented by four, eight, 10, 12 and 20-sided die), the game defied expectations and quickly sold out, with successive and bigger print runs also snapped up. Thirty years later, Arneson said Dungeons and Dragons was selling more than a million copies a year.

David Lance Arneson was born on October 1 1947 in Minnesota. At school he enjoyed history but frequently became diverted by "what-if" speculations about past events rather than concentrating on actual facts. He went on to study History at the University of Minnesota. By the summer of 1970 he and a group of like minded high-school and college students were gathering for role playing games around the ping-pong table in his parent's cellar in St Paul, where the evolution from traditional "military miniatures" to Dungeons and Dragons began.

From the beginning however, it was clearly not a "cool" pursuit: "I'm trying to take myself seriously," recalled one member of the original group, Dave Wesley. "They're playing with elves and dwarves. I'm thinking 'I'm never going to tell anybody I was in this game'." Arneson's own father was bemused by the fact that gaggles of young players disappeared into his basement for hours on end, but stubbornly refused to raid the alcohol cabinet housed there.

It was between 1970 and 1974, when the first 500 copies of D&D were printed, that the game's complex rules were developed. But as the game took off, the partnership with Gygax, whom Arneson had met in 1969 at a gaming convention, became strained. Arneson was forced out of the company, TSR, which they ran together. His acrimonious departure, which centred over creative credits and royalty rights, led to a series of court disputes, which were eventually settled in 1981.

Though the pair remained in contact, and Arneson briefly rejoined TSR in the mid-1980s, the friendship which produced D&D was ruptured. "We don't hate each other. We don't hang out with each other that often, though. We just kept going our own two separate ways," Arneson said.

Arneson continued to develop a range of fantasy role playing games in the 1980s before moving into computer programming which he "hated". He also consulted for computer companies before moving to California, developing an interest in the education of disabled and disadvantaged children through role-play.

In the early 1990s he moved to Florida to work at a private university, where he taught students about the complexities of computer code.

Despite his interest in computers, Arneson, who continued to play RPGs until his death, was not drawn to video games, advances in which have opened up the world of Dungeons and Dragons to a huge new audience of players, many of whom now team up with each other online from across the globe to complete the kinds of quests that Arneson and his friends pursued around his parent's ping-pong table 40 years ago.

Arneson returned to Minnesota in his final months where he reassembled his original gaming group. He married Frankie Anne Morneau in 1984, and they had one daughter who survives him.