This film began as a direct-to-television co-production between AB-PT and Toho, and thus was shot in black and white in the Academy aspect ratio. AB-PT went bankrupt during production, but a two-part TV film was still completed. The two parts were then edited into a single, longer feature film to be shown in Japanese theaters, which involved extending and re-recording the musical score, shortening scenes and adding new ones. This theatrical feature was then cropped shot by shot and released in an ersatz anamorphic widescreen format apparently adapted from SuperScope called TohoPanScope. Neither the TV version nor the theatrical version of this film exist in the Academy ratio, but the fully mixed audio track for the TV version still exists as of this date.
Coming off of their three previous giant monster films (Godzilla (1954), Le Retour de Godzilla (1955) and Rodan (1956)), the team at Toho thought that the next giant monster should have the traits of a water monster, a spiked monster, and a flying monster. Varan was initially conceived by Tsuburaya as a Godzilla-kappa hybrid, while Akira Watanabe completed his concept art by incorporating the skin membranes of a flying squirrel.
Ishirô Honda did not look back fondly on this film, stating "This is not a work I am happy with. If we could have restarted from the beginning, scenes such as those with the Self-Defense Forces might have been more grand. Everything was pretty much shot on [a small] set, with maybe a tiny bit of location filming. . . The entire film would have turned out a little better."
Honda was unaware of the film's American (and British) version, Varan the Unbelievable (1962), until the 1980s, when he mentioned that he had "no clue" if Varan was ever released overseas.
Tsuburaya was disappointed in the final Varan suit due to its being excessively muscular in appearance. Murase made numerous adjustments to the suit, applying sawdust to the surface and blending the muscles with paint to obscure or define them, but was unable to achieve a favorable product due to being unable to alter the suit's internal structure.