Former Capcom veteran Hideaki Itsuno will lead LightSpeed Japan Studio, which will be focused on developing AAA action games.
The open world title is set 70 years in the future, with Tokyo segregated into new and old sections based on sea levels.
"We'll continue to enjoy full independence in the games that we create and the operation of the studio," Lucid says.
Billed as a tribute to titular wuxia writer Jin Yong, the action game, developed by Lightspeed Studios, is being built on Unreal Engine 5.