The screenplay originated in the 1970s from an earlier script Van Sant abandoned after reading John Rechy's 1963 novel 'City of Night,' feeling his own work paled in comparison.

Van Sant combined two separate scripts—'Modern Days' (Mike's story) and a modernized version of Shakespeare's Henry IV plays (Scott's story)—using a 'cut up' technique inspired by William S. Burroughs, after seeing Orson Welles's 'Chimes at Midnight.'

The character of Bob Pigeon was inspired by a real man Van Sant knew named Bob, who reminded him of Falstaff and was fond of hustler boys, while Mike's narcolepsy was inspired by a real-life guide who always looked about to fall asleep.

The film's title comes from the song 'Private Idaho' by the B-52's, which Van Sant heard while visiting the state in the early 1980s.

To convince River Phoenix to take the role, Van Sant had Keanu Reeves personally deliver the script by riding his 1974 Norton Commando motorcycle from Canada to Phoenix's family ranch in Micanopy, Florida.

Phoenix originally agreed to play Scott, but since Reeves had already been cast in that role, the two convinced Phoenix to take the more challenging role of Mike instead.

Kiefer Sutherland revealed in a 2012 interview that he turned down the lead role because he wanted to go skiing, a decision he later said he regretted.

Before Phoenix and Reeves were cast, Van Sant had attempted to make the film with a shoestring budget using real street kids, including actor Rodney Harvey, who was originally set to play Scott.

The film had no storyboards or shot list, and due to the low budget, shooting days typically ran from 6 am to 11 pm.

Phoenix expanded the campfire scene from three pages to eight, writing Mike's love confession to Scott himself; Van Sant kept the entire scene as written without trimming it.

Several cast and crew members, including Michael Parker, Phoenix, Reeves, and musician Flea, lived together in a house in Portland during filming and would play music together a couple of times a week.

The time-lapse cloud photography, which conveys Mike's narcoleptic perspective, was shot independently by cinematographer Eric Edwards and wasn't in the original script; the producer worried he was wasting too much film.

Composer Bill Stafford, a pedal steel guitarist, created the score including instrumental arrangements of 'Home on the Range' and 'America the Beautiful,' and won the Independent Spirit Award for Best Film Music in 1992.

River Phoenix won the Volpi Cup for Best Actor at the 1991 Venice Film Festival, and reacted by saying he didn't want more awards, calling Venice 'the most progressive festival.'

In 2024, the film was selected for preservation in the United States National Film Registry by the Library of Congress for being culturally, historically, or aesthetically significant.