Speaking to the BBC, the Lionhead boss says he's failed as a designer because he has not been able to attract a wider audience to gaming.
"It's a failure borne out of myself as a games designer and creator and indeed the wider games industry," he said in the BBC games blog. "For making games that only appeal to a small part of world. The number of people playing games is going up, but it's going up slowly. The number of people who could potentially be playing games is huge.
"For a long time I made games I mistook adding complexity for being a good thing," he added, touching on his famous habit of chucking extra options and features onto his games.
"In actual fact I kept adding new features to a game when I should have been fixing something deep down in the guts of the game that was slightly wrong.
"What I feel more and more as I get more and more experienced is that if I can make something really simple, give gamers a highly-polished experience, then I have succeeded." Don't worry Peter, we love you really.
Last week Molyneux revealed the third "big feature" in his Xbox 360 sequel Fable 2; an Xbox Live Arcade spin-off game and full drop-in, drop-out co-op.
"I want people to sit down and play the game with a friend," Molyneux told the Beeb. "Now sometimes your friend could be a gamer. But probably more likely your friend is going to be someone who has never played the game before.
"Both of you should feel good about what you are doing, neither of you should feel stupid about what you are doing."
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. hez no failure