The sequel was developed under working titles Highlander II: Yellowknife and Highlander 2020, with producers pre-selling most international rights at the 1987 MIFED market for $18 million before Hollywood studios showed interest, while European distributors were enthusiastic backers.

The original screenwriter Gregory Widen had first refusal rights but was unavailable, and both Larry Ferguson and Peter Bellwood also turned down the writing job; several drafts by writers like Edward Khmara were considered progressively worse by director Russell Mulcahy and star Christopher Lambert.

Writer Brian Clemens solved the script's central problem by inventing the alien planet Zeist to explain the immortals, a twist Mulcahy called a 'masterstroke,' though it retroactively contradicted the mythology of the first film.

Director Russell Mulcahy repurposed an aerial 'Flying Blades' battle sequence he had originally developed for an unmade adaptation of The Wild Boys.

Sean Connery agreed to reprise his beheaded character for $3 million for six days of work, but refused to set foot on set or acknowledge the film unless his payment was held in escrow; his fee later rose to $3.5 million after footage of his opening scene was damaged and had to be reshot.

Filming took place in Argentina starting March 1, 1990, but was delayed by a wave of hyperinflation that spooked producers into freezing production, ultimately costing the film about $3 million extra and pushing the budget $10 million over, prompting a completion bond company to seize control of production.

Christopher Lambert and Michael Ironside struggled with their broadswords during their fight scene and ended up accidentally injuring each other.

Actor John C. McGinley later regretted his choice to lower his character's voice as deep as possible in an attempt to emulate Orson Welles.

Director Russell Mulcahy was sidelined during editing and pick-up filming as the bond company drastically altered the story, and he was so unhappy with the final result that he walked out of the film's world premiere.

The film became infamous as one of the worst movies ever made, holding a 0% rating on Rotten Tomatoes and a 31/100 on Metacritic, with Roger Ebert giving it 0.5 stars and calling it 'almost awesome in its badness.'

Because the theatrical cut was so troubled, it prompted multiple later revisions including a 1995 108-minute 'Renegade Version' that removed all references to the immortals being aliens from Zeist, and a 2004 'Special Edition' with new CGI effects, which fans consider closer to canon than the original release.