After filming of final shootout was done, director Walter Hill was told to include more of it so he went back and shot more footage but in the end he cut it down because, in his words, "it got too big". This is probably why this scene has some continuity mistakes which are often thought to be caused by cuts made on violent scenes in order to avoid X rating.
The title comes from a line of dialog written in the script. The line "terminate with extreme prejudice" first appears on film in Apocalypse Now (1979) (although it originates in the Bernard Conners novel "Don't Embarrass the Bureau"). Both films were written by John Milius.
Funeral scene of sheriff Hank Pearson (Rip Torn) was deleted after first two screenings of the movie. Soundtrack release for the movie does however includes track called "The Funeral" which was composed by Jerry Goldsmith for that deleted scene.
Michael Ironside said in interview for A.V. Club in February 2015 that approximately 45 minutes were cut out of the original version of the movie. Actor Andy Robinson had a role which was completely cut out. Reason for that is because after seeing his first cut of the movie Hill thought that "It looks like it's starring Michael Ironside, with Nick Nolte, Powers Boothe, and Rip Torn supporting him, so we're gonna cut the whole Andy Robinson side of the film out." Ironside said that in deleted plot part he and Robinson's character were playing CIA agents trying to do whole covert op, and Ironside's character was the go-between between the military side of the story, the police side of the story, and the government side of the story.
TriStar Pictures studio executives disliked the first version of theatrical trailer so they made their own. However, their version of the trailer made the movie look like it's ex-soldiers vs Texas Ranger type of movie, which it isn't. Jerry Goldsmith composed the music for original trailer but after it was rejected the track which he composed was not used. Instead the trailer which was released included two tracks from other movies; Paul's Theme by Giorgio Moroder from Cat People (1982) and Evacuation by Mike Oldfield from The Killing Fields (1984).