The movie is partially based on a true story. Misty, a 12-hand palomino tobiano and sabino pinto, was born on July 20, 1946 at the Beebe family farm on Chincoteague Island, Virginia. Although Misty was sired and born domestically, her parents -- known as Pied Piper and Phantom -- were wild ponies from nearby Assateague Island. Author Marguerite Henry visited the Beebe farm, and wanted to take Misty back to her home in Illinois, to serve as the model for her next book. Clarence "Grandpa" Beebe agreed to this only after Ms. Henry promised to put his grandchildren, Paul and Maureen, in the book as the main characters. "Misty of Chincoteague" was published in 1947, and was named as a Newberry Honor book. The book became so popular with children that Misty herself was named an honorary member of the American Library Association. Misty lived with Marguerite Henry in Illinois until 1957, when she was sent back to Virginia. She lived on the Beebe farm for the rest of her life, and had three foals: Phantom Wings, Wisp O' Mist, and Stormy -- who also became the subjects of books by Marguerite Henry. Misty died in 1972. Her taxidermized body (and that of her foal, Stormy, who died in 1993) are on display at a museum at the Beebe ranch.
Billy Beebe, a grandson of the real Clarence Beebe, appears in the movie as Tommy, the boy whose father initially buys Phantom and Misty. Denny Beebe, another Beebe grandson, appears as Denny Cole, rider of the horse called Patches in the festival horse race. (The real Clarence Beebe died in 1957, shortly after his grandson, Paul Beebe, was killed in a car crash at age 21. Maureen Beebe Hirsh still lives on Chincoteague Island.)
With the exception of the Beebe family characters, most of the people in the film are played by real-life residents of the town of Chincoteague, Virginia. The premiere of the film was held at the Island Theater (now the Roxy Theater) in Chincoteague. As part of the celebration, the real Misty placed her hoof prints in cement, and author Marguerite Henry signed her name next to the hoof prints, on the sidewalk outside the theater.
Children on the island were allowed to miss school for the filming of one particular scene in which there is a carnival. The children were told they could play and eat as many hot dogs as they would like, then given a dollar at the end of the day. Many of these adult children still live on the island and will volunteer to talk about their experience.