Rare worked closely with Nintendo on their titles. Nintendo provided top-level support for Rare. They had done fantastic with the Donkey Kong Country series on Super Nintendo, so Nintendo had a lot of trust in them and a great working relationship at a time when the company held their cards a little too closely to their chest. I think Nintendo's dev tooling for the N64 was pretty weak and devs were struggling as it was with the transition from 2D to 3D in the crucial early years of the platform. That coupled with the capital intensity made it prohibitive for smaller studios to develop on. But Nintendo trusted Rare and fronted the capital to publish. Later Rare was acquired by Microsoft.

Thanks! Donkey Kong Country felt truly next gen at the time, it makes sense that Nintendo would offer reward deals afterwards.

I remember when my parents brought home Donkey Kong Country around Thanksgiving 1994 when Incredible Universe had it displayed in giant stacks in the video game area. That was such a great game!

Rare during the Nintendo 64 era was a second party developer (developed by an external party, published by an external party), not a third party developer (developed by an external party, published internally by the console manufacturer). Prior to making Donkey Kong Country, the majority of Rare's games on Nintendo were third party games. The Battletoads games were published by Tradewest for example, but they had games published by other publishers as well. I'm not exactly sure of the details how Rare got access to the Donkey Kong IP to make Donkey Kong Country, but I think it was Rare's excellent use of the pre-N64 release SGI dev hardware to model the characters that garnered them favor with Nintendo. Given the landmark success of the series, a strong partnership followed.

Nintendo has always been fond of favoring second party relationships and working tightly with them to create either new IPs themselves, or expand on their existing IPs. HAL Laboratories is famous for Kirby, Super Smash Bros, working closely with Creatures, Inc. and Game Freak on Pokémon titles, and the Mother / Earthbound series, and was so close that their darling programmer and later manager Satoru Iwata became the first president of Nintendo outside of the Yamauchi family. Other strong second party development studios that Nintendo has hitched their horse include but aren't limited to Intelligent Systems (Fire Emblem), Retro Studios (Metroid Prime, though now a first party studio), and Argonaut Software (Star Fox).

Rare was just trying to make games before their eventual partnership with Nintendo grew. I believe I read somewhere though that the relationship started to wane, so when Microsoft started wining and dining studios to build their own second party studio, when they came to Rare, the company saw the dollar signs and promises of more creative agency and decided to hitch to another cart. Since then, the company has released some successful titles since then, but arguably none are as notable as during the heyday of their partnership with Nintendo.