With support for multicolor sprites and a custom chip for waveform generation, the C64 could create superior visuals and audio compared to systems without such custom hardware.

The C64 dominated the low-end computer market (except in the UK and Japan, lasting only about six months in Japan[7]) for most of the later years of the 1980s.[8] For a substantial period (1983–1986), the C64 had between 30% and 40% share of the US market and two million units sold per year,

In the UK market, the C64 faced competition from the BBC Micro, the ZX Spectrum, and later the Amstrad CPC 464.[11] but the C64 was still the second most popular computer in the UK after the ZX Spectrum.[12] The Commodore 64 failed to make any impact in Japan. The Japanese market was dominated by Japanese computers, such as the NEC PC-8801, Sharp X1, Fujitsu FM-7, and MSX.[13]

Part of the Commodore 64's success was its sale in regular retail stores instead of only electronics or computer hobbyist specialty stores.

One computer gaming executive stated that the Nintendo Entertainment System's enormous popularity – seven million sold in 1988, almost as many as the number of C64s sold in its first five years – had stopped the C64's growth. Trip Hawkins reinforced that sentiment, stating that Nintendo was "the last hurrah of the 8-bit world".[57]