The movie is actually a thinly veiled account of real events that occurred on the Pine Ridge Indian Reservation during the early to mid-Seventies. Exploration for Uranium, disease from irradiated water, the American Indian Movement (AIM) and the "Traditional" Natives fight against the Tribal government "Guardians Of the Oglala Nation (GOON's), and the FBI's assistance to the "Goons" by providing weaponry and other assistance are some of the things that are referred to in the movie that were true and documented by Writer/Director Michael Apted when he was a regular visitor to the Reservation during that time.
During the early to mid-Seventies, there were fifty-seven unsolved murders on the Pine Ridge Indian Reservation due to the fighting between the "Traditionals" and Tribal government sanctioned "goons". This made the Village of Pine Ridge (Pop. 1100) the "Murder Capitol of the Nation" with the highest number of violent death per capita in the United States.
The video clip which William Dawes shows Ray Levoi in the beginning of the film is actual footage of Native American activists rioting in Custer, South Dakota. The activists were protesting the change from a white man's charges from murder to second degree manslaughter, in the death of a Native American in Custer. They scuffled with the South Dakota Highway Patrol, set fire to the courthouse, and incurred property damage.
The movie contains several references to the original Wounded Knee incident, which took place on the Pine Ridge Indian Reservation in 1890. For instance, the character William Dawes shares a surname with Senator Henry Dawes, of Dawes Act notoriety. The Dawes Act's goal was to assimilate American Indians into white society. Additionally, Frank Coutelle refers to Walter Crow Horse as "Crowfoot". Crowfoot was the name of the first of Sitting Bull's sons to be shot and killed at the original Wounded Knee massacre.
A fictitious Sal Mineo movie, "Arrows on the Prairie" is mentioned. Although the movie is fictional, Mineo did star as a young Sioux warrior in Tonka (1958) and later as a Cheyenne warrior in Cheyenne Autumn (1964).
A paperback novel published by HarperCollins titled Thunderheart based on John Fusco's screenplay, was released on May 28, 1992. The book dramatises the fictionalised events of the Wounded Knee Incident, as depicted in the film. It expands on the ideas of how an FBI agent's assignment to uncover the truth behind violence on an Indian reservation leads to a wide-range conspiracy.
The trivia item below may give away important plot points.
The character of Maggie Eagle Bear was likely based on AIM activist Anna Mae Aquash, who was found murdered along Highway 73 on the Pine Ridge Reservation in February 1975. Aquash had been a schoolteacher in an Indian school in Minneapolis - alluded to in the character's comment that she is from Minneapolis, and the fact that when the audience first sees her, she is exiting the school with a classroom of children.