After Michael Myers died at the end of Halloween II (1981), the plan by John Carpenter was to make a new "Halloween" movie each year, each telling a different Halloween-related story. After this movie underperformed at the box office, the film-makers decided to bring Michael back to life for future sequels.
The film's original director, Joe Dante, approached Nigel Kneale to write the film while Kneale was temporarily living in Hollywood writing the remake of Creature from the Black Lagoon (1954) for director John Landis that was never made due to budget cost. Dante wanted a new and different story than the two previous films in the series, so he suggested Kneale write a treatment around the word Halloween. The producers liked the idea, and after Joe Dante moved on to another project, producer John Carpenter's regular collaborator, Tommy Lee Wallace, came in as the new director. Kneale initially blamed the drastic changes to his script on executive producer 'Dino De Laurentiis' not understanding his dialogue when it was translated to Italian. Kneale requested his writing screen credit be removed once his comical mystery screenplay was rewritten by an uncredited Carpenter, and then later Wallace (who received sole screen credit as writer), to include more gore and simplify the story.
Supposedly, part of the genesis of this film came from a comment made by film critic Rex Reed. Reed panned Halloween II (1981), saying it was so bad that, "If they make a Halloween III, I'll turn in my press card."
A novelization of the film was published in 1982 by science-fiction writer Dennis Etchison under the pseudonym Jack Martin. Despite the film's commercial failure, the book became a best-seller and was even reissued two years after the film's release, in 1984.
When Cochran talks to Daniel in the holding cell, he mentions the ancient Irish holiday, Samhain. The sacrifices referred to by Daniel are references to the Pagen tradition rituals that were developed in the early stages of the ancient holiday.
A special platform was built for the scene that shows the robot Ellie Grimbridge's head poking out of the ground next to her body. The scene was done by having Stacey Nelkin stick her head through a hole in the platform while a body double wearing Ellie's clothes stuck her head down another hole on the platform.