The film is an adaptation of the 1989 British Channel 4 television series Traffik, whose rights were obtained by producer Laura Bickford, who liked its structure.

20th Century Fox originally financed the project but demanded that Harrison Ford star and that major script changes be made; when Soderbergh refused, the film went into turnaround and was shopped to other studios, all of which rejected it due to its three-hour length and subject matter before USA Films agreed to fund it with a larger budget.

Harrison Ford was seriously considered for the role of Robert Wakefield and even met with Soderbergh to develop the character, but he turned down the role on February 20, reportedly because he wanted to reconnect with his action-fan audience; the part then went to Michael Douglas, who had previously turned down an earlier draft.

Real U.S. politicians such as Senators Harry Reid, Barbara Boxer, Orrin Hatch, Charles Grassley, and Don Nickles, as well as Massachusetts governor Bill Weld, agreed to appear in an entirely improvised cameo scene, replacing footage that had already been shot with actors playing those roles.

Half of the footage from the first day of shooting came out overexposed and unusable, forcing Soderbergh to begin reshoots before financiers even learned of the problem; insurers subsequently required him to personally cover the cost of any further reshoots.

Soderbergh served as his own cinematographer under the pseudonym Peter Andrews, operating the camera himself to eliminate distance between himself and the actors, drawing inspiration from the cinema verite style of Ken Loach's films.

Benicio del Toro insisted that his Mexican character speak Spanish throughout, refusing a studio suggestion to shoot his scenes in both English and Spanish out of fear his dialogue would later be dubbed by another actor after he had worked hard to master Mexican Spanish inflections.

Soderbergh gave each of the film's three storylines a distinct color grade: cold monochrome blue tungsten film with no filter for the Wakefield story, warm overexposed diffusion filters for the Ayala story, and tobacco filters with a 45-degree shutter angle followed by an Ektachrome step for the Rodriguez story, so audiences could tell them apart.

A planned scene in which Robert Wakefield smokes crack after finding it in his daughter's bedroom was cut shortly before filming after Soderbergh felt, following rehearsal, that the character would not actually do it, a decision screenwriter Stephen Gaghan agreed with.

Soderbergh cited Richard Lester and Jean-Luc Godard as influences, studied The Battle of Algiers and Z for their 'caught' rather than staged footage feel, and drew on Alan J. Pakula's All the President's Men, even replicating that film's opening-credits typeface and placement.

Several characters are based on real figures: General Arturo Salazar is modeled on Mexican General Jesús Gutiérrez Rebollo, who was secretly paid by Juárez Cartel leader Amado Carrillo Fuentes, while Porfirio Madrigal is modeled on Fuentes and the Obregón brothers are modeled on the Arellano Félix brothers of the Tijuana Cartel.

The production consulted the DEA and U.S. Customs, who pointed out inaccuracies in the script and granted access to a Mexico border checkpoint used in the film, though they did not attempt to influence the script's content.

The first cut of Traffic ran three hours and ten minutes before Soderbergh trimmed it to two hours and twenty minutes; despite early fears the film might receive an NC-17 rating, MPAA president Jack Valenti reportedly granted it an R rating due to its value as 'message-powered entertainment.'