Japan's Yomiuri Shinbun newspaper published an article about the creation of Pikachu the other day. It interviews three key people: artist Ken Sugimori, planner Koji Nishino, and character designer Atsuko Nishida. It's in Japanese, but there are some English summaries out there.
The Japanese article of course goes into a lot more detail.
+At the time Sugimori was only creating BADASS Pokemon that appealed to males (Mewtwo, Gyarados, Snorlax, Lapras). The designers wanted to also create some cute Pokemon, so they wanted the perspective of a female designer, Nishida (who worked on Pulseman) to help create cuter Pokemon.
+The only guidelines Nishida was given were that it had to be an electric type and that it must evolve two times. The mysterious third evolution was to be GOROCHU, which apparently had fangs sticking out of its mouth and two horns. It was removed for balance reasons.
+Like many Pokemon at the time, it was initially created via sprite art on a computer and not drawn. It originally resembled a round daifuku (Japanese mochi dessert) with no distinction between the head and body.
+The inspiration for the more animal-design was a squirrel. The red cheeks were to mimic squirrels keeping food in their cheeks. After Satoshi Tajiri saw the Pokemon, he decided to dub it the "electric mouse" Pokemon and thus that connection was made.
+Nishino intentionally made Pikachu difficult to find in the original games because he liked the design so much and didn't want other people to have it.
+The black tips to Pikachu's ears are a leftover design choice from his original daifuku model. Sugimori was the one who decided on its yellow color and the back stripes since you mostly look at the Pokemon from behind.
+Pikachu's more sleek design was inspired by the anime.
+Sugimori wanted to create his own cute Pokemon, thus Clefairy was born.
Interesting to see a peek into the collaborative method Game Freak uses when creating Pokemon. Outside of Pikachu, Nishida is also credited with designing most of the Eeveelutions (all except Flareon and Jolteon), the Munna, Cottonee, and Petilil lines, plus more recently Alolan Raichu.
