According to Billy Bob Thornton in a February 7, 1997 interview on Howard Stern's radio show, Karl living behind a shed is based on a boy where he grew up who could not walk or talk very well, so his parents kept him in a shed out back. Billy said the boy's mother was scared by a snake when she was pregnant, so they felt he was a child of the devil. They kept him locked up and fed him like a dog. It turned out the boy had polio.
Billy Wilder once told Billy Bob Thornton that he was "too ugly" to be an actor, and that he should write a screenplay for himself, where he could exploit his "less than perfect" features. After this movie launched Thornton's career, he publicly discussed his conversation with Wilder, which was at a cocktail party where he was working as a waiter. He got a call from Wilder, who invited him over to his house. Wilder said he didn't recall their conversation, but was glad that he heeded his advice. As a gift, Wilder gave Thornton a paperback copy of this movie's script with his autograph, and a personal message inscribed on it.
According to the DVD commentary, Billy Bob Thornton considers this film to be the greatest movie he has ever made.
Karl was named after Billy Bob Thornton's special needs cousin, who died a month before Billy Bob wrote the movie.
When the film was in pre-production, Billy Bob Thornton envisioned John Ritter's character as having dyed blonde hair, thinking that Vaughan was a man who was transferred out of St. Louis for his job, where the film was set, and based his hairstyle on what he saw men sporting in GQ Magazine. Thornton, Ritter, and the film's hairstylist began experimenting with hairstyles on Ritter at the hotel where the cast and crew stayed. According to Thornton, Ritter was insistent that the hairstyle wasn't too drastic, as he had to go back to Los Angeles to shoot a Public Service Announcement. But when the hairstylist came up with, and applied the hairstyle that Ritter's Vaughan character would sport in the film, Thornton immediately approved. However, when Ritter finally got a look at his hair in the hotel room's bathroom mirror, he was infuriated at Thornton. Thornton said that when Ritter went back home to shoot the Public Service Announcement, he was wearing a baseball cap.