Scriptwriter Ted Timmins said that it was limited in how it handled two people playing the same adventure.
"We do admit, the co-op in Fable II was rubbish. We'd be restricted to being within ten yards of each other, I'd have to be your henchman," he told Eurogamer.
Timmins explained that Fable III will allow heroes to travel from one game save to another during two player, including full stats and weapons, and that players can roam anywhere within the same region.
Co-operative players can also get married in the game and deposit gold into a shared bank account.
Fable III will be available on October 26 for Xbox 360 and PC.
> Click here to read our review of Fable II