James Ellroy's book was based in part on the true story of the murder of Elizabeth Short, an aspiring actress who'd moved to Hollywood in the mid-1940s from Medford, Massachusetts. A drifter and hanger-on who never managed to break into films, she disappeared in early January 1947. On January 15, 1947, her horribly mutilated corpse was found in an empty lot in south-central Los Angeles. Her murderer was never publicly identified or apprehended.
David Fincher had originally planned to direct and intended to make a three-hour version shot entirely in black and white. Fincher subsequently left the project, apparently because he doubted that he would be able to make the film exactly the way he envisioned.
The screen test that characters keep watching are not in the James Ellroy novel. They were a plot device created by screenwriter Josh Friedman. The real Elizabeth Short claimed to have screen tested at major studios but no such footage has ever been found.
Mia Kirshner was originally intended to be feeding lines to potential actors in screen tests. However, her performance so caught the attention of director Brian De Palma and writer Josh Friedman that she was cast as Elizabeth Short and her role expanded significantly compared to the novel.
Brian De Palma's initial cut ran at roughly three hours and was a faithful adaptation of the book, with more time dedicated to Bucky's psychological breakdown during the investigation and his obsession with avenging the Dahlia. James Ellroy was shown a print of this version and wrote an essay praising it; entitled "The Hillikers," it was published in re-issued prints of the novel, which were released before the film premiered. In the interim between Ellroy's having seen the director's cut and the publication of his essay, the film was significantly edited. After seeing the theatrical cut, Ellroy refused to comment on it, except to tell the "Seattle Post-Intelligencer", "Look, you're not going to get me to say anything negative about the movie, so you might as well give up."
The character of Lorna Mertz, played by Jemima Rooper, was based on a figure in the real case named Norma Lee Myer. Under the name Lynn Martin, she had been living with Elizabeth Short and another girl named Marjorie Graham in a hotel shortly before the murder. At the time of the investigation, Martin was 15 years old and had several arrests on her record.
Marjorie Graham, a former roommate of Elizabeth Short (see above), was originally a character in the screenplay. She was written into one scene, occurring right after Sherryl Saddon's scene, in which she insinuates that Elizabeth Short and Lorna Mertz were consorting with a lesbian. This scene was written out, and Sherryl performs this function in the final film.