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The producers of Silent Night, Deadly Night wanted director Lee Harry to re-cut the first film and insert just one or two new scenes with Eric Freeman playing a mental patient, to make the story in the original film appear to be nothing more than the ravings of an asylum inmate. But screenwriters Lee Harry, Joseph H. Earle, Dennis Patterson and Lawrence Appelbaum, wrote short vignettes involving the patient's youth, as he killed several people, and eventually it became this sequel. But there was not enough material for a full length film, so numerous flashback sequences were used to extend the running time. When the film still ran short, a lengthy closing-credits sequence (nearly ten minutes in length, showing the full cast and crew of this film and its predecessor) was added to pad-out the film's running time even further.
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The film Ricky and Jennifer are watching at the movie theater is Silent Night, Deadly Night.
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This was filmed in 10 days.
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According to James Newman and Lee Harry, the choice of who to play Ricky Caldwell came down to Eric Freeman and another actor. The other actor has more experience and was a better actor overall, but they liked Eric's looks better so they chose him for the role.
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The film was rejected for a UK video release in 1987 by the BBFC after the distributor refused to make cuts to a double murder scene and shots of topless women being killed.
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The scene where Ricky (Eric Freeman) yells "Garbage Day!" before shooting a man holding up a trashcan dead became a famous Internet catchphrase and countless videos of the clip and the clip crudely edited can be found on Youtube.
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Cinematographer Harvey Genkins stepped in to play the Salvation Army Santa after the actor that had originally been hired for the role failed to show up for filming.
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Co-screenwriter Joseph H. Earle provides the dubbed voice of the Salvation Army Santa that Ricky gets his Santa suit from.
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Director Cameo 

Lee Harry:  Appears as the patron that the theater loudmouth talks to (he's the mustachioed man to the left of him). He also provides the voice of the commentator of the Christmas parade that Mother Superior watches.
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