Woody Allen said the idea for Manhattan originated from his love of Gershwin's music; while listening to an album of the composer's overtures, he thought it would make a beautiful black-and-white romantic movie.

Allen described Manhattan as a mixture of what he was trying to do with Annie Hall and Interiors, exploring how people try to live decently in a junk-obsessed contemporary culture without selling out.

In his autobiography Apropos of Nothing, Allen wrote that the character Tracy, played by Mariel Hemingway, was based on his real-life girlfriend Stacey Nelkin, whom he dated in the second half of the 1970s; the filmmakers renamed the character 'Tracy' instead of 'Stacey'.

Decades later, Christina 'Babi' Engelhardt claimed the film was partly based on her own alleged relationship with Allen that began when she was 17, though Nelkin has confirmed Tracy is based on her, and Engelhardt later suggested Tracy might be 'a composite' of several women Allen was dating at the time.

Allen chose to shoot in black and white and in Panavision widescreen (2.35:1) after discussing it with cinematographer Gordon Willis, wanting to capture Manhattan the way he remembered it from childhood, almost like old photographs.

The iconic shot of Isaac and Mary on a bench under the Queensboro Bridge was filmed at 5 a.m.; since there was no bench at the real location, the production brought its own, and Willis arranged with the city to keep the bridge's necklace lights on past their scheduled shutoff time to capture the shot.

During the Queensboro Bridge shot, one string of the bridge's lights unexpectedly went out just as filming began, forcing Allen to use that imperfect take in the finished film.

After completing the film, Allen was so unhappy with it that he asked United Artists not to release Manhattan and offered to make another film for free instead, saying he felt if this was the best he could do, he shouldn't be given money to make movies.

The entire soundtrack consists of George Gershwin compositions, performed by the New York Philharmonic under Zubin Mehta and the Buffalo Philharmonic under Michael Tilson Thomas, including the film's signature piece, Rhapsody in Blue.

Allen insisted that the film's widescreen aspect ratio be preserved for home video releases, an unusual request at a time when widescreen films were typically pan-and-scanned for television and video, resulting in letterboxed copies with a gray border.

In 2001, the U.S. Library of Congress selected Manhattan for preservation in the National Film Registry, deeming it culturally, historically, or aesthetically significant.

Manhattan's portrayal of a middle-aged man dating a teenager drew little criticism upon release but faced renewed scrutiny in the late 2010s amid Woody Allen's controversy following sexual abuse allegations by his daughter Dylan Farrow.

In 2012, Manhattan's screenplay was performed live at the Los Angeles County Museum of Art as part of Jason Reitman's Live Read series, with actors like Stephen Merchant, Olivia Munn, and Shailene Woodley reading the script without rehearsal, and the performance was not recorded.