Many of the characters in the film are based on real-life characters from the New York theater world. Aside from Roy Scheider, Leland Palmer's character was based on his wife/frequent star Gwen Verdon. John Lithgow's character was also based somewhat on the New York theater director Michael Bennett, director of "Dreamgirls" with whom Bob Fosse had a longstanding rivalry. The character of producer Jonesy Hecht was based upon his fellow longtime rival Harold Prince. Ann Reinking was more or less playing herself. The character of songwriter "Paul Dann" is a swipe at Stephen Schwartz, with whom he had unhappily worked on "Pippin". Jules Fisher, the lighting designer on many of Fosse's shows, and later the producer of his show "Dancin'", makes an appearance as a lighting designer in the scene with Lithgow. The film is based on Fosse's real-life heart attack whilst both editing his film Lenny (1974) and simultaneously directing the original 1975 Broadway production of "Chicago".
The studio did not originally want Roy Scheider for the role of Joe Gideon. They wanted Warren Beatty or a more critically acclaimed actor for the role. Bob Fosse stuck to his choice and fought for Scheider, eventually securing him in the lead.
Bob Fosse's 16-year-old daughter, Nicole Fosse, appears briefly as a dancer, doing stretches in front of a vending machine, who is asked, "Can't you do that somewhere else?" while Joe Gideon is introducing his new idea for the Air-otica number.
According to Shirley MacLaine in her autobiography "My Lucky Stars", the idea for this film was hatched when Bob Fosse was hospitalized for a heart attack. MacLaine claims she was the one who gave Fosse the idea to do "a musical about his death" though she said Fosse seemed to not remember this later. However, Fosse did offer her the role of Audrey Paris, she wrote.
One of the first lines, "To be on the wire is life; the rest is waiting", is spoken voice-over as we see a man falling from a high wire into a net (and the speaker then admits he did not make it up). The quote is generally attributed to Karl Wallenda, who had died the year before the film came out, when he fell from a high wire without a net.
The budget for this film blew-out from US $6.5 million to US $10 million. Director Bob Fosse went over-budget before filming the famous "Bye, Bye Life" finale. The Columbia studio refused to give him any more money. At an impasse, Columbia execs privately showcased much of what was in the can of the film for the president of Twentieth Century-Fox. Impressed, the president agreed that Fox would finance the remainder of the shoot; he also asked for and received distribution and cable rights. Profits from the picture were split according to the contract between the two studios, although Fox received top billing over Columbia in the credits.
The relationship between the characters Victoria (Deborah Geffner) and Joe Gideon (Roy Scheider) was based on the relationship during rehearsals between director Bob Fosse and dancer Jennifer Nairn-Smith whilst working on the stage musical "Pippin". Nairn-Smith actually appears in this movie playing a Principal Dancer.