Propellerhead soon focused their attention on their new product, the award-winning Reason, released in 2000. In January 1999 the protocol was opened for general use by third parties without any license fee, to allow communication between different sequencers. Released in 1998, it provided a virtual audio and synchronization connection between Cubase and ReBirth. ReWire was developed jointly between Propellerhead and Steinberg for use with their Cubase sequencer. Roland Corporation requested that an acknowledgment be added to the ReBirth packaging and splash screen the unofficial endorsement became a marketing boost for Propellerhead, and they have retained a close relationship with Roland ever since. It was hailed as an affordable alternative to buying old, unreliable hardware devices. In 1997, Propellerhead released ReBirth RB-338, a step based, programmable sequencer which emulated classic Roland instruments commonly associated with techno: two TB-303 Bass Line Synthesizers and a TR-808.A TR-909 drum machine was added in version 2.0. ReCycle was launched in conjunction with Steinberg, who marketed it as a companion to Cubase, as it brought a simple way of gaining control over tempo and timing of audio loops. The export medium was Propellerhead's own REX format. Their first release was ReCycle, a sample loop editor that could change the tempo of a loop without affecting the pitch.

Propellerhead Software was founded in 1994 by Ernst Nathorst-Böös, Marcus Zetterquist and Peter Jubel, who still hold prominent positions within the company.

Reason 4 license number