Originally the idea for the film was that aliens had seen Gonzo on The Muppet Show (1976) and came to visit him on Earth. Gonzo would believe he was one of them until he discovered the truth at the movie's conclusion.
In the DVD commentary, which includes a handful of The Muppets in character, Kermit the Frog says he's walking away to go to the snack bar and doesn't come back until just as the movie is ending. He claims that he was delayed by walking back into the wrong DVD commentary, that of Star Wars: Episode I - The Phantom Menace (1999). That movie and this both feature the voice-over of Frank Oz. Furthermore, the Walt Disney Company has since bought both the Muppets and Star Wars franchises.
The last The Muppets movie to have Frank Oz's involvement. For most of production, Frank Oz was not available so substitute puppeteers performed his characters, and Oz later dubbed the voices during post-production.
Baab the Sheep was performed by eleven year old Kristina Donnelly, who was given the opportunity through the Make-a-Wish Foundation. Kristina wanted to be an actress in a Muppet film, but when given a choice between that and voicing a puppet of her own (the suggestion made to her by Steve Whitmire and Dave Goelz), she chose the puppet. Near the end of her time filming Steve and Dave presented her with a special edition of the Hensonville News Observer and a bag full of The Muppets merchandise. The puppet she voiced, Baab, was also given to her.
The original concept was based upon the song "I'm Going to Go Back There Someday" which Gonzo sings in The Muppet Movie (1979). Muppeteer Dave Goelz recorded a new version of the song (in 4/4 time) but it was not used in the film. It was included on the soundtrack album, however.
The first The Muppets film since the deaths of Jim Henson and Richard Hunt to have their signature Muppet characters (Rowlf, Scooter, and Dr. Teeth) talk. Rowlf's only line is "Awwww!" at the breakfast table, when he finds out they're having bologna. Dr. Teeth's only line is "Shalom!", on the way to a bar mitzvah. Scooter was voiced by Richard's brother Adam Hunt, and his line is "Get your Gonzo T-shirts. Only ten bucks!"
The basic premise of this film is that Gonzo is an extraterrestrial alien. 20 years earlier, in a "Veterinarian's Hospital" sketch on The Muppet Show: Raquel Welch (1978), Rowlf suggested that Gonzo should "leave his body to science fiction".
The band Ween was asked to provide a song for this movie. It was to be for the scene in which Gonzo was sitting on the roof dreaming of where he might have come from. After the song was recorded, it was decided that all of the music in the movie should be funk/soul and they asked Ween to record a remake of "Brick House". They declined.
An earlier draft of the story was written by Kirk Thatcher called "Muppets in Space." In the screenplay, aliens abducted Kermit because they believed him to be their leader, leading the other Muppets to attempt to save him. A set of Welch's Jelly Glasses were produced based around this theme.
According to Brian Henson, the film was planned by The Jim Henson Company to be released in the winter, around February 2000, but Columbia wanted it to be one of their big summer movies, rushing production and causing there to be less advertising for the film. It also suffered competition from Walt Disney Pictures' Inspector Gadget (1999).
The trailer features a few scenes that are not in the finished film. They include a scene during the breakfast sequence where Pepe says "The kitchen is closed!" (which appears in the outtake reel on the DVD) and a scene with Rizzo talking to Gonzo on the roof. The trailer also briefly includes the song "Rescue Me", which doesn't appear in the movie.
While promoting The Muppets (2011) in Germany, Kermit told ENERGY Berlin 103,4 that "with all due respect to Muppets from Space, um, you don't want that to be the last movie you ever do. You want to do a better one."