Tom Hanks optioned the book in 1999 after reading it to his children, hoping to play both the Conductor and Santa Claus.

Author Chris Van Allsburg had refused to sell film rights to the book, but changed his mind after learning of Tom Hanks's involvement, on the condition that the film not be animated since he feared this wouldn't accurately represent his characters.

Rob Reiner was originally hired as director with a planned December 2001 release, but after repeated postponements Robert Zemeckis replaced him in February 2002 and rewrote the script with William Broyles Jr., expanding minor characters and adding the new Hobo character.

Although Van Allsburg wanted a non-animated film, Zemeckis felt a live-action version would look awful and cost around $1 billion instead of $160 million, so he devised a motion-capture process filmed on a black box stage to preserve the book's art style.

The motion-capture process was so expensive, costing about $1 million per minute of footage, that Warner Bros. needed a co-financier; after Universal passed, investor Steve Bing's Shangri-La Entertainment agreed to fund half the budget.

Tom Hanks plays six roles in the film, including a small child whose voice was later dubbed by Daryl Sabara; Zemeckis initially considered having Hanks play every character but abandoned the idea after Hanks grew exhausted trying it.

Unlike the rest of the motion-captured cast, the characters Smokey and Steamer were animated traditionally with skeletal rigs due to their large size discrepancy and more caricatured design.

The train engine in the film was modeled after the Pere Marquette 1225; Warner Bros. worked with the Steam Railroading Institute, which provided a bulb, valve gear, a box of coal, and recorded engine sounds for the production.

The film was Michael Jeter's last performance; he died in March 2003 before finishing his lines as the engineer and fireman, so André Sogliuzzo was brought in to record the remaining dialogue and re-dub most of Jeter's existing lines.

The song 'Believe', written by Alan Silvestri and Glen Ballard, was nominated for an Academy Award and performed at the 77th Oscars by Josh Groban and Beyoncé, later winning a Grammy in 2006.

The North Pole buildings in the film were designed to evoke an earlier era of American railroading, drawing inspiration from Chicago's Pullman neighborhood, home of the Pullman railroad car manufacturer.

With a budget of $165–170 million, the film held the record for the most expensive animated feature at the time of release.