Under CEO Arnold Greenberg, the company entered the video game console business with the Telstar in 1976. Dozens of companies were introducing game systems that year after Atari's successful Pong console. Nearly all of these new games were based on General Instrument's "Pong-on-a-chip". However, General Instrument had underestimated demand, and there were severe shortages. Coleco had been one of the first to place an order, and was one of the few companies to receive an order in full. Though dedicated game consoles did not last long on the market, their early order enabled Coleco to break even.

Coleco continued to do well in electronics. They transitioned next into handheld electronic games, a market popularised by Mattel. Coleco produced two very popular lines of games, the "head to head" series of two player sports games, (Football, Baseball, Basketball, Soccer, Hockey) and the mini-arcade series of licensed video arcade titles such as Donkey Kong and Ms. Pacman. A third line of educational handhelds was also produced and included the Electronic Learning Machine, Lil Genius, Digits, and a trivia game called QuizWhiz.

Zaxxon is quite possibly the biggest handheld game ever made, and weighs a fair bit too, especially once the four D Size batteries are in place! It makes clever use of mirrors and two LCD displays to produce 3D like effects.